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NS3040 Fall Term 2015 Pre-NAFTA Assessment NAFTA Cost/Benefits U.S. I • Stephen Stamos, Reflections on the Proposed U.S.Mexico Free Trade Agreement, 1993 U.S. Perspective • Positive aspects • U.S. firms have better access to cheaper labor/parts • Increased access to growing export markets • Liberalized foreign investment laws in Mexico • Expansion of financial and services sectors to México • Mexico becomes a very reliable sure of petroleum • Enhance Mexico’s political stability • Overall a net employment gain • Increase the competitiveness of U.S. firms • Assist U.S. banks in resolving Mexico’s debt service • Ease immigration pressures 2 NAFTA Cost/Benefits U.S. II U.S. Perspective • Negative Aspects • Employment loss in select industries and regions • Forced restructuring in sectors like agriculture • Downward pressure on U.S. wages/standard of living • Increased competition for small-medium sized firms • Uneven regional impact 3 NAFTA Cost/Benefits Mexico I Free Trade for Mexico • Positive aspects • Increased direct private foreign investment • Repatriation of “flight capital.” • Increased economic growth • Increased Export Growth • Increased diversification of the economy • Increased employment and Income • Increased expansion of the internal market • Promote a more modern and open economy 4 NAFTA Cost Benefits Mexico II Free Trade for Mexico • Negative Aspects • Increased integration with the U.S. Economy – increased vulnerability • Worker and community Issues: health, safety and the environment • Child labor laws and regulations • The adjustment realities for Mexican firms • The changing structure, composition and composition of production in Mexico • Uneven regional economic impact – Northern border versus other areas • A challenge to Mexico’s historic nationalism • Compromises future policy options in terms of the external debt situation 5 NAFTA Cost Benefits Mexico III • Real Questions for Mexico • Re-examination of the positives • Will capital flight return? • Will wages (real income) increase? • Will domestic markets expand? • Will the pace of immigration slow? • Will foreign investment flow significantly to where it is needed? • What will be the character of a more open and modern economy that is driven by export-led growth? • Will the lost standard of living of the 1980s be regained for those who lost it? 6 NAFTA Cost Benefits Mexico IV The Real Questions for Mexico • A Re-examination of the negatives • Will the negatives be even worse than imagined? • What kind of protections can be built into the agreement to seriously address genuine negatives • Final Thoughts • NAFTA obviously inevitable • When U.S. economy strong the positive economic influences will be more self evident, especially in the Northern border states • While economic benefits for parts of Mexico obvious, for Salinas NAFTA a essential part of his neoliberal reforms to bring Mexico into the global economy. 7