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North American Free Trade Agreement (NAFTA) was lauched in 1994. It started with the negotiation of the US Canada Free Trade Agreement in 1985 and US-Canada-Mexico in 1994. This was the largest free trade zone in the world, known as eliminating all tariffs among the three member countries, and providing a phased reduction of non-tariff barriers. (Ian M, 2003). This agreement was also supposed to protect intellectual property rights, safeguard foreign investment, and not require lowered environmental standards. (LaFalce, 1993) NAFTA had a huge impact on economic, education, health, living standards and so on. Therefore, were these the reasons why NAFTA is formed? Did NAFTA benefit all countries? Let us discuss by answering 3 questions: What were the reasons behind Canada, the US, and Mexico, entering into the North American Free Trade Agreement? What were the concerns of each nation entering into this agreement? To what extent have these concerns materialized?

What were the reasons behind Canada, the US, and Mexico, entering into the North American Free Trade Agreement?

Mexico
Between three countries, Mexico had got more benefits since NAFTA was signed. The growth of employment opportunities in Mexico would increase steadily because all the manufacturing industries from USA and Canada would move to Mexico due to low wages and high productivity advantages. In 1991, the average hourly labour cost in Mexico was $2.32 compared with $14.31 in the USA and $14.71 in Canada (Ian M, 2003). With this greater comparative advantage, Mexico would benefit in long-term under NAFTA. Secondly, by doing free trade with two developed countries, the Mexican government expected their economy would develop well in the future. The fact was that the value of Mexican cotton and apparel

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exporting to the U.S. raised from $ 3 billion to $8.4 billion from 1995 to 2002, with a record high of $ 9.4 billion in 2000 (TheTexitileIcon, 2011). Mexicos cotton textile in share market grew 5 % from 1995 to 2002 (8% - 13%). With NAFTA, Mexico could attract more foreign investors to make Mexico become an economic tiger like Canada and US.

Canada
There were few reasons for Canada entered NAFTA. One of the reasons was that Canada wanted to part of the agreement. It could be a good opportunity for Canada to have free trade with Mexico. Canada could expand their economy in Mexico like US. Before NAFTA, research discovered that the average Mexican consumer was buying more Canadian products annually ($US 325) than a Japanese ($US 300) or a European ($US 200) (Nicholson, 1995). With this advantage, Canada would have greater access into the Mexican market if they entered into NAFTA. Also, Canada realized once US had free trade with Mexico, the US economy would develop steadily and leave Canada behind. Canada also knew that US and Mexico would sign an agreement with or without Canada participating (Nicholson, 1995). They were afraid the Mexican economy would be better than the Canadian economy after NAFTA entered into force. NAFTA would give Canada greater access to US market since NAFTA was like an expanded agreement of FTA (free trade agreement between Canada and United States).

United States
One of the reasons for US entering NAFTA was the prospect of more liberal access to economic opportunities within Mexico (Nicholson, 1995). There were many opportunities the US economy can expand their power in the Mexican economy. Mexican economy was a very new and growing economy. With NAFTA, US would have to spend much less on production of

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goods as the labor cost in Mexico was cheaper compared to labor cost in United States. US economy could control the Mexican market by establishing manufactures, offices, and so on since US firms had more comparative advantages than Mexican firms. It would give a wider selection for American consumer and industrial purchasers (Granzin, 1998). American companies could receive fair treatment when they corporate in Canada and Mexico under NAFTA. Other benefits could be increasing mobility of transportation carriers, protecting US Mexico border, and so on. This agreement would also make the diplomatic relationship between United States, Canada and Mexico become very well in the future. Moreover, United States wanted to make North American become the big union compared to European Union. North American economic could gain more powerful against European economic and Asia economic. NAFTA also bring Canadian and Mexican national security apparatus under closer U.S. control and surveillance and to protect investment and business throughout the region (Carlsen, 2009). What were the concerns of each nation entering into this agreement?

Mexico
Even though Mexico gained more benefits in NAFTA but they still had many concerns to worry about. Firstly, Mexico feared that their economy would be dominated by US firms. It meant the Mexican economy would be controlled by US firms sooner or later because Mexican firms did not have ability to compete US and Canada firms. For example, United States and Canadian firms were better in term of capital, human resource, technology, and so on. This was the reasons why they produced better products than Mexico firms. It led to the high demand of US product among the Mexican consumption. The Mexican government feared one day if the advantage of labour force (lower wages) was no longer existed, their economy would become

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tragedy because United States and Canada firms would have no interest in the Mexican market. Secondly, Mexico was afraid that Mexican people would leave their country and go to US or Canada. With NAFTA, Mexican people could have a high chance to live and work in US and Canada legally than before and nobody wanted to stay in Mexico.

United States and Canada

United States and Canada had same concerns when they entered this agreement since both were developed countries and had free trade agreement before. These concerns were loss of less-skilled American jobs, downward pressure on American wages, increased trade in illegal drugs, dilution of American environmental standards to effect a compromise, increased illegal immigration to the United States, legal hassles, productivity problems from using Mexican labor, and degradation of transportation safety (Granzin, 1998).. The greatest concerns were loss of jobs. In term of difference in wage, it was no surprise that jobs were being moved from United States and Canada to Mexico after NAFTA was signed. The demand of jobs was high and many firms would take these advantages to decrease the wages as much as possible. US citizens living standard would be downgraded in term of lower wages and high consumption. The chance of revolt would be very high, like Occupy Wall Street protests. The government also feared about reducing investment in Canada and US. Investors would spend money on the new market (Mexico) and it meant they had to reduce investment in Canada and US in order to balancing. The large illegal immigrants from Mexico would be a big concern. Mexicans would take jobs away from un-educated Americans and Canadian because they were willing to accept the lower wages than the average. The government also had to spend more money in education, health care and so on because of illegal immigrants.

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To what extent have these concerns materialized?

Mexico
The Mexican economic developed very well after NAFTA. For example, Mexicos trade (the sum of exports and imports) with NAFTA partner rose from 25 percent of its GDP in 1993 to 51 percent in 2000 (Kose, 2004); Mexicos exports have exploded under NAFTA, quintupling to $292 billion last year (Malkin, 2009). Even though Mexico economic showed good outcome but they could not hide the fact that their economic was still subordinates by US firms. Most of Mexican main industry belonged to US firms, like automobile industry. Even agriculture industry which Mexicans used to have more advantages before could not compete with US or Canadian firms. NAFTA was one of the reasons that 1.3 million farm jobs have disappeared since 1993 (Smith, 2003) in Mexico due to the high US food importing. Mexicos farm country has been overwhelmed by an influx of crops from the United States in the years after the North American Free Trade Agreement (The Washington Post, 2007). Farmers worried about their life after globalization. The huge amount of importing goods from US made Mexican farmers life harder than before. Martin, Mexican farmer, said that: If a lot of chicken comes in from the United States, were not going to be able to maintain our farms; whats going to happen? People are going to get tired. People are going to go north (The Washington Post, 2007). Moreover, the promise of job increasing in Mexico was not fulfilled. Mexico was still exporting people, almost half a million each year, seeking opportunities in the United States that they do not have at home (Malkin, 2009). According to Mexicos Nation Council of Population, more than 6.2 million Mexicans now live in the United States illegally (The Washington Post, 2007).

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United States and Canada

It seemed all concerns of entering NAFTA were real. A research showed that from 1990 to 1997, US had an average of 37 000 jobs lost per year due to increased Mexican trade (Burfisher, 2001). During 2000 2003 period, 2.9 million manufacturing jobs were lost in the US (Ki hee, 2010). Even though the economy of US grew 71 % after NAFTA, the real compensation of non-supervisory workers grew only 4 % (Ki hee, 2010). The low-skilled workers market was affected the most because their work had shipped to Mexico due to low salary. Canada had less than half of full time jobs after NAFTA with 350 000 manufacturing jobs lost during 2004-2010. Nowadays, new jobs in Canada were low-paying, insecure jobs with fewer benefits, particularly for women (Ki hee, 2010). There were the facts that happened in US and Canada jobs market in this day. The consequences of losing jobs were very dangerous. One of the best examples was the Occupy Wall Street that happened in September 17, 2011. It was fighting back against the corrosive power of major banks and multinational corporations over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest recession in generations (OccupyWallSt.org, 2011). With the high unemployment rates in US and Canada at present, the quantity of protests would be increased in the future. Illegal drugs would be a big issue for US and Canada. Mexico was known as the illegal drug making country where you can find any kind of drugs with cheap price. The amount of illegal drugs, like marijuana, heroin and cocaine, was increased every year since NAFTA. It would be huge profit if all illegal drugs would be sold in US or Canada. In the US, wholesale illicit drug sale earnings estimates range from $13.6 to $48.4 billion annually (Cook, 2007). The US government officials estimated that heroin production in Mexico jumped from 17 metric

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tons in 2007 to 38 tons in 2008 (Cratty, 2010). With increasing of the illegal drugs, the United States and Canada government would spend a lot of money on drug wars and this was not what they want. It was also the large amount of illegal immigrants from Mexico even though the United States and Canada government tried to minimize it with many solutions. In 2010, the US Citizenship and Immigration Service estimated there are 11.2 million illegal immigrants with the number has grown by as much as 500,000 a year (Knickerboker, 2006). After all, when entering into the agreement that involved nations, the governments have to think carefully in order to maximize all the benefits and minimize the risks that they may face in the future. The main goal of the agreement is to make everyone which their country has been involved in the agreement have better life and live happily. Even though this agreement is not good at all aspects but it does improve peoples life in US, Canada, and especially Mexico.

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References Ian M, T. (2003). The politics of industrial restructuring: NAFTA and beyond. Journal of Fashion Marketing & Management, 7(2), 111-118 LaFalce, J.J. (1993). North American Free Trade Agreement: what are we really getting?. USA Today magazine. (122 (2580). 22. Retrieved from EBSCOhost TheTexitileIcon (2011). NAFTA Confiscate Barricade Amid Mexico & US. Retrieved from http://www.thetextileicon.com/blog/2011/07/nafta-confiscate-barricade-amid-mexico-us/ Nicholson, Patrick D. (1999). An Evaluation Of NAFTA After 5 Years And A Look At Its Future. Retrieved from http://library.jid.org/en/mono38/nicholson.htm Granzin, K. L., & Painter, J. J. (1998). Public support for free trade agreements: The influence of economic concerns, group..Journal of Macromarketing, 18(1), 11, Carlsen, L. (2008, October). NAFTAs Dangerous Security Agenda. Peace Review. Pp. 442-447. Doi:10.1080/10402650802495031 Kose, M.Ayhan, Meredith, Guy M., Towe, Christopher M. (2004).Why Has NAFTA affected the Mexican economy? Review and Evidence. International Monetary Fund Working Paper. Pg 12. Malkin, Elisabeth (2009). Naftas Promise, Unfulfilled. Retrieve from http://www.nytimes.com/2009/03/24/business/worldbusiness/24peso.html?pagewanted=all Smith, G., & Lindblad, C. (2003). MEXICO Was NAFTA Worth It?. Businessweek, (3863), 66-72.

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The Washington Post. (2007) NAFTA Anxiety: Trade agreement has not produced expected gains in Mexicos economy. Retrieve from http://www.twnside.org.sg/title2/FTAs/info.service/fta.info.service053.htm Burfisher, M. E., Robinson, S., & Thierfelder, K. (2001). The Impact of NAFTA on the United States. Journal of Economic Perspectives, 15(1), 125-144. Ki hee, K. (2010). NAFTA is a Good Deal for Workers in North America: Theories and Evidence. Proceedings Of The Northeast Business & Economics Association, 517-522. OccupyWallSt.org. (2011). OccupyWallStreet: the revolution continues worldwide!. Retrieved from http://occupywallst.org/about/ Cook, Colleen W. (2007). Mexicos Drug Cartels. Retrieved from www.fas.org/sgp/crs/row/RL34215.pdf Cratty, Carol. (2010). Mexico drug cartels extend reach in U.S. CNN. Retrieved from http://articles.cnn.com/2010-03-26/us/drug.trends_1_drug-cartels-mexican-border-drugviolence?_s=PM:US Knickerbocker, Brad. (2006). Illegal immigrants in the US: How many are there?. The Christian Science Monitor. Retrieved from http://www.csmonitor.com/2006/0516/p01s02ussc.html