Pros and Cons of NAFTA


The North American Free Trade Agreement (NAFTA) opened up more trading opportunities between Mexico, Canada, and the United States. It also created more competition between businesses of these three nations that have had some unexpected negative outcomes. Here are the pros and cons of NAFTA to consider when examining this important trading agreement.

What Are the Pros of NAFTA?

1. It creates more travel opportunities for all citizens.
NAFTA has made it possible to travel throughout most of North America without much restriction. An enhanced driver’s license is all that is needed for border crossings for Americans, eliminating the need for a passport. Although this has also made illegal immigration more likely, it also allows for more business opportunities.

2. Investment opportunities have been created in all three nations.
The manufacturing sector has seen dramatic increases since the implementation of NAFTA because of reduced trade and regulatory restrictions. This has created boosts in mining, insurance, banking, and other supportive sectors, which has created economic benefits in turn as well.

3. Trade deficits have been brought under control.
Trade between the three nations has increased so that the import/export relationship has been equalized. This has allowed everyone to be able to access more of their preferred products.

What Are the Cons of NAFTA?

1. It has created internal conflict.
Mexico subsidizes gasoline. The United States has farm subsidies in place. Canada has a different system of healthcare. As trade opportunities increased, businesses discovered that the government was providing competition instead of other businesses, making it difficult to stay in business.

2. It has lowered the wage standard.
The US created a minimum wage so that all Americans could have a livable income. With the influx of low wage labor from Central America through Mexico and new outsourcing opportunities, the minimum was of $7.25 has ultimately created stagnant wages on a national level.

3. There is now less competition than before.
Companies are consolidating in order to survive, which creates fewer competitive products for consumers to enjoy in the marketplace. With fewer options, there are fewer natural controls in place to keep prices lower.

The pros and cons of NAFTA show that it may be an imperfect relationship, but it is still an important one. With small tweaks here and there, the negatives could be potentially fixed so a greater economic benefit could be achieved.