North America and the NAFTA
North America and the NAFTA
The North American regional integration under NAFTA has brought numerous economic and social benefits to the member nations. The underlying principles of sustainable development of economies dictate for the reliable flow of goods and services in and out of a nation (Naik, 2002). This is the sole purpose of NAFTA as it has significantly led to the removal of trade tariff barriers by member nations, thus allowing for the free flow of local products and services (Naik, 2002). According to available statistics on the benefits of NAFTA, Canada has over doubled its export trade to both America and Mexico (Rahman & Feils, 2008).
Although Mexico is a developing nation, it has recorded an increased export of its local commodities while gaining the competitive advantage of importing other essentials tariff free. These have the implication that NAFTA has no doubt increased trade transactions among the member nations. The regional integration has been praised for promoting free flow of labor force and knowledge across the nations (Rahman, & Feils, 2008). The sustainable development of an economy of any nation is mainly dependent on the availability of effective and reliable human resources.
Therefore, with NAFTA serving to allow free flow of workforce across the member nations, it has significantly enhanced the productivity firms in the region. This is clearly evident by the fact that firms have the competitive advantage of outsourcing cheap but reliable employees from other nations; particularly from Mexico. Still, the flow of technology, innovation, and sharing of research information is another area that the member nations are benefiting from NAFTA (United States Trade Representative, 2010).
Such have played quite an important role in enhancing the sustainable economic development by firms as it reduces the overall cost of research investment by individual firms. North America and the NAFTA have enjoyed the advantage of increased foreign direct investment among the three nations (Rahman, & Feils, 2008). According to information from reliable sources, most American and Canadian industries are increasingly transferring their manufacturing and assembling operations to the Mexican nation.
Such are attributed to the fact that the nation provides cheap and reliable labor as well as other low operational costs (United States Trade Representative, 2010). On the other hand, the America and Canada are benefiting from foreign direct investment from the Mexicans particularly in the service industry (Rahman & Feils, 2008). Therefore, the NAFTA should be praised for the increased cross border trade between the member nations. Such has significantly enhanced foreign direct investments and free flow human resources, technology and innovations.
All these have evidently promoted social and economic development in North America. The North America and the NAFTA has brought numerous negative economic impacts to nation economies and businesses in the region. Being the only underdeveloped nation in the agreement, Mexican internal investments have become victims of unfair production. This is because it is mainly acting as a damping site for products produced by industries in Canada and America (Towe, Meredith, & Kose, 2004).
Just an example here is the high rate of corn inflows from America over the 2000 financial year after the American government subsidized it agricultural production sector with an estimated $10. 1 billion. Indeed, such a move witnessed the negation of the economic importance of the Mexicans agricultural sector (Towe, Meredith, & Kose, 2004). On the other hand, the US has been faced with the problem of increased exports of textile products from Mexico, a move which greatly threatens the American textile industry.
The regional integration has been evidently blamed for the increasing levels of unemployment in the American nation (Woellert, 1997). The agreement has increased the flow of labor force across member nations. Such have the implication that firms are increasingly engaging in outsourcing cheap, skilled, and reliable labor from other nations, a factor that has compromised availability of job opportunities for most Americans. Statistical analysis indicates that, since the signing of the agreement, an estimated 10,000 Canadian companies have been bought by foreign investors (Rahman, & Feils, 2008).
On the Mexican side, its agricultural sector which forms a major employment avenue for the local has been greatly affected by damping of food exports from the US. Therefore, NAFTA is evidently creating the problem of unemployment to the citizens of the individual nations at the expense of labor and products flow (Naik, 2002). NAFTA has received many critics for its poorly structured environmental policy. According to the provisions of the convention, once a commodity is sold once in a nation, the nation cannot stop its trade (Rahman, & Feils, 2008).
Due to this reason, the convention is a threatening the sustainable economic and environmental development of the individual nations. Just is an example is the dispute between the Canadian government and an American companies, which is shipping large amounts of water from Canadian lakes and rivers (Rahman, & Feils, 2008). This is not only threatening the future water sustainability in Canada but much compromising the ecosystem of Canada. Therefore, although NAFTA has its standing advantages, some issues need to be addressed.
These include; protection of local investments from unfair competition, and addressing the defining provisions of chapter 11 to safeguard environmental and health concerns. All these are important in realizing full benefits of the convention. References Naik, B. (2002) Impact if NAFTA on U. S. Trade with Latin American Countries. South Dakota Business Review, 13, 1-5. Rahman, M. , Feils, D. (2008). Regional Economic Integration and Foreign Direct Investment: the case of NAFTA. Management International Review, 48, 3-15.
Towe, C. , Meredith, G, & Kose, M. (2004). How Has NAFTA affected the Mexican economy? Review and Evidence. Retrieved May 17, 2010, from <http://www. imf. org/external/pubs/ft/wp/2004/wp0459. pdf> United States Trade Representative. (2010). North American Free Trade Agreement (NAFTA). Retrieved May 17, 2010, from <http://www. ustr. gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta> Woellert, L. (1997) NAFTA Blamed for Lost Jobs. The Washington Times, 29, 4-5