NAFTA and Labor Issues

NAFTA and Labor Issues

Introduction

            The North American Free Trade Agreement (NAFTA) is a trade agreement signed by the United States, Mexico, and Canada. The agreement has led to the creation of trilateral rules based trade alliance in North America. NAFTA is supplemented by the North American Agreement on Labor Cooperation (NAACL) and the North American Agreement on Environmental Cooperation (NAAEC) (Bow & Anderson, 2014, p. 26). The main vision behind the agreement was to improve North America’s competitiveness in the international market. Member countries were also hoping to enjoy reduced trading costs as well as strengthen business investment. NAFTA was also implemented to protect intellectual property, build a framework that encourages cooperation among member countries, and facilitate cross-border movement of products and services (Ravenhill, 2014, p. 177). Ultimately, member countries hoped to enjoy many trade benefits. The implementation of NAFTA experienced mixed reactions among scholars, politicians, and individuals. Essentially, some individuals have supported it while others have come out strongly to oppose it. Critics have associated labor issues facing the region with the implementation of the agreement (Hussain, 2012, p. 102). This paper intends to examine labor issues linked with the NAFTA. It discusses the arguments for the agreement before analyzing criticism. The paper maintains the supposition that NAFTA has done more harm than good in relation to labor.

Arguments for NAFTA

Proponents of NAFTA have argued different reasons as to why they believe it is beneficial the countries involved and the rest of the world. For one, NAFTA has helped in improvement of labor and wages among member countries. This has been achieved through the development of parallel agreements such as NAALC to address working conditions and wages of workers. The cooperation is also responsible for the improvement of standards of living in the region (Schirm, 2002, p. 68). Labor issues such as discrimination have also been addressed through the efforts of NAACL. Migrant workers have also benefited from it as their rights are protected under the cooperation. Companies in the region have also been forced to improve work conditions (provide safe work environments) to avoid problems with the law (Bow & Anderson, 2014, p. 29). The NAFTA played an integral role in the development of the cooperation. This is one of the major factors that have contributed to it being considered a success as it has paved way for more opportunities to improve living standards in the region (Belous, 2010, p. 108).

As debated by Gongalez (2011), the NAFTA was aimed at creating more job opportunities. Companies find it challenging to market their goods in the global market in the presence of trade tariffs. For instance, U.S. firms encountered problems entering the Mexican and Canadian market before the signing of agreement. Nonetheless, the challenge was eliminated with the implementation of the NAFTA. Companies expanded their activities as they had access to the international market. This led to the creation of many job opportunities. Wage increase was also anticipated. Critics have dismissed this claim arguing that NAFTA reduced wages as manufacturing firms hired Mexicans. Equally, they are of the view that the only people who benefited from increased job opportunities were cheap laborers from Mexico (McIntyre, Ivanaj, & Ivanaj, 2009, p. 302).

The NAFTA has also opened opportunities for small and medium sized enterprises (SMEs) in the region to expand their activities. Trade tariffs make it hard for SMEs to expand to the international market and enhance their edge (Bow & Anderson, 2014, p. 45). With NAFTA, such businesses can enter the global market to enjoy great opportunities associated with such markets. For instance, SMEs from the Canada used this opportunity to enter the international market. This is also a supposition critics have argued against claiming that NAFTA created expansion opportunities for large and well-established companies and not SMEs. Fundamentally, SMEs have continued to struggle as more large companies enter the market. Mexico has suffered more a result of the problem. Particularly, the agreement has increased cheap exports in the country. SMEs that cannot offer cheap prices are end up exiting the market (Hussain, 2010, p. 154).

Research has also shown that NAFTA benefited the economy of member countries. Increased exports improved economic performances. Canada and Mexico are among top exporters to the United States. For instance, they toped among exporters in 2014 with 240.3 billion (Mexico) and 312 billion dollars (Canada). The U.S. economy has also benefited from NAFTA. It is clear from research that its agricultural sector received a major boost as a consequent of NAFTA implementation. Corn farmers were able to export their goods to the Mexican market. Critics argue that this affected the Mexican corn market in a negative manner as farmers found it problematic to compete with the cheap prices. Overall, improvement of the sector created more jobs as well increased wages. Mexican farmers were also able to import agricultural products not available in the market (Ravenhill, 2014. P. 181).

Arguments against NAFTA

Two decades ago, the major critics of NAFTA were labor unions. Specifically, the unions warned that agreement would have negative impacts on jobs and workers. In their opinion, the agreement would lead to loss of jobs (manufacturing jobs). Equally, unions were of the view U.S. workers would receive lower wages as companies struggle to cut their labor expenses. In 1993, labor unions backed movements and protests around the U.S. to criticize the agreement. About 20 years later after the unions made these assertions, they still maintained that the NAFTA was indeed a bad idea. Research has shown that their fears were founded as the NAFTA has resulted into numerous labor challenges (Cotter, 2007, p. 180 ).

As mentioned in the introduction, the agreement involved three countries, that is, the United States, Mexico, and Canada. Labor is cheaper in Mexico as compared to the case in the U.S. and Canada. The NAFTA saw many U.S. manufacturing firms moving their production activities from high-cost states. This was done to cut their manufacturing costs. Trade deficits between the U.S. and Mexico were reported at 97.2 billion dollars between 1994 and 2010. This led to the displacement of approximately 682,900 U.S. jobs. However, out of the total, 116,400 were lost after 2007 (Bow & Anderson, 2014, p. 129). As such, NAFTA may not have been the only cause and the country was facing challenges associated with the global financial crisis. Overall, 80 percent of the jobs lost were in manufacturing. A number of states were hit hard including Texas, Michigan, New York, and California as many plants from these locations moved their activities to Mexico. Affected industries included, among others, electrical appliances, computers, textiles, and motor vehicles (Ravenhill, 2014, p. 183).

Not all companies from the U.S. and Canada were lost to Mexico. There are those that used the threat to move to Mexico to reduce their workers bargaining power. Particularly, workers had two options: either demand more salary and risk losing the company or be satisfied with what they paid (Taylor & Thomas, 1999, p. 65). Most manufacturing companies used this is strategy to ensure their employees did not unionize. Without the support of labor unions, workers are left with little bargaining power. As such, they are at the mercies of their employers. This has been a major challenge (Bow & Anderson, 2014, p. 160). Fundamentally, workers are forced to work for less or risk losing their employment. The country was able to avoid this problem before the NAFTA. Labor unions in the country warned about the same. The problem of suppressed wage growth started with the implementation of the agreement (Kay, 2005, p. 721).

Mexico has also suffered as a result of the NAFTA. Evidently, 1.3 million farm jobs have been lost since the implementation of the agreement. The NAFTA removed trade tariffs on agribusiness that existed between the three countries. As a result, many agricultural products were exported from the U.S. to Mexico. The Mexican corn sector was greatly affected as a result of increased supply of U.S. agricultural products. The products were marketed below cost making it hard for Mexican products to compete in the market (Taylor & Thomas, 1999, p. 86). Many corn farms went out of business. The problem worsened when the Mexican government reduced subsidies awarded to farmers. Only large farms enjoyed the subsidies with small farms being left at a disadvantage. Increased unemployment also reduced farm wages as labor supply surpassed the demand. This is still a challenge to Mexico. The government has been trying to protect local farmers from unfair competition. Nonetheless, it can do little with agreement in place.

In line with Aswathappa (2010), the NAFTA also led to the expansion of maquiladora program. Many U.S. manufacturing firms exploited maquiladora workers. Generally, they employed Mexican workers near the border to capitalize on cheap labor costs. This enabled them to cheaply assemble goods before they were exported to the U.S. As argued by McIntyre, Ivanaj and Ivanaj (2009), maquiladora workers have neither labor rights nor health protections enjoyed by their counterparts protected by the law or unions. Most of them work for many hours with low pay to earn a living. The program has also been criticized for exposing female potential workers to pregnancy test before they can secure employment (Caulfield, 2010, p. 307). In general, companies especially in the United States have taken advantage of the program to reduce their labor expenses. This also makes it hard for protected to secure employment or get a job as they demand for more salaries. In the same way, NAFTA contributed to protected workers losing their employment as manufacturing firms opted for maquiladora workers (Cotter, 2007, p. 208).

The NAFTA also led to increased mobility of individuals across borders of the three countries. The U.S. and Canada were greatly affected as Mexicans crossed the borders in search of greener pastures (Illing, 2004, p. 139 ). Many politicians have faulted NAFTA for the increased number of illegal immigrants from Mexico. Mexicans are willing to work for less as compared to their counterparts in the U.S. and Canada. With this being the case, local companies in these countries prefer hiring them to boost their profitability. Essentially, many people in the U.S. and Canada are losing their jobs due to job displacement (Bow & Anderson, 2014, p. 189). Worker exploitation is also a major issue. There are firms that hire illegal immigrants and pay them peanuts with the knowledge that no action can be taken against them considering the fact these people are in the country illegal. Reporting exploitation may lead to deportation, a risk none of them may be willing to take (Ehrenreich & Hochschild, 2002, p. 118).

Canada has also suffered loss of jobs and reduction in income. Some individuals and sectors have benefited from the NAFTA. However, overall effects were not good. Average income growth performance has been very poor as compared to any period since the World War II. Income inequality is also a major concern (Esteva, 1999, p. 162). NAFTA created a foundation for the rich to amass more wealth as the poor languish in poverty. Wealthy individuals in the country continue to earn more income as the expense of the majority of the population. Precarious employment has also been growing in the country. The growth is attributed to the implementation of NAFTA. Labor unions are undermined as they try to fight for the rights of their members (Ehrenreich & Hochschild, 2002, p. 125). Canadian companies also threaten to enter the Mexican market should unions fail to agree to their terms. To save their members jobs, unions are left with no choice but to take bad deals. The country’s dependence on the United States for economic development has also grown. Fundamentally, it relies on its exports to fuel its economy (Ravenhill, 2014, p. 187).

My Position

            It is evident from the above analysis that the NAFTA has its pros and cons. Member countries have benefited in one way and suffered in another. Different arguments in relation to the agreement have their strengths and weaknesses. However, critics provide a more compelling case as compared to proponents. Specifically, they are more convincing (Ravenhill, 2014, p. 193). NAFTA has the potential to benefit all member countries. Nevertheless, as at it is at with the current situation members have suffered. The U.S. and Canada have lost many jobs to Mexico as companies seek to cut their labor expenses. Low wages is also a major challenge that originates from the implementation of NAFTA. Generally, cheap laborers from Mexico make it challenging for Canadians and Americans to secure employment (Public Citizen, 2014, p. 30).

One of the major goals of NAFTA was to create job opportunities and improve standards of living through trade. This goal has been realized to some extent. Even so, many jobs have been lost since the implementation of the agreement. For instance, the above analysis has shown that many Mexican farmers have been affected by the NAFTA as it resulted into increased supply of imported agricultural products. The U.S. farmers have also suffered with reduced prices of agricultural products. In general, wages have dropped making it hard for farmers to earn a good living (Cotter, 2007, p. 217).

The then leaders of the three countries may have hard good intentions when they entered into the agreement. Nevertheless, this overestimated its benefits. They also failed to anticipate some of the challenges it would face or bring to the society. As a result, this compromised their ability to handle the issues in question as desired (Belous, 2010, p. 209).

Conclusion

            The NAFTA was created to enhance trade in North America. Its implementation led to the removal of trade tariffs among member countries to ensure free trade. Member countries also intended to use the agreement to boost economic development as well as create more job opportunities. There are individuals who support the NAFTA while others have opposed it. Proponents argue that the agreement has helped in boosting trading activities in the region. They are also of the view that NAFTA helps in ensuring a peaceful society as it has strengthened relationships between member countries. On the contrary, the NAFTA has also been criticized considering the costs linked with it. Critics argue that the agreement has resulted in loss millions of jobs with Canada and the United States being affected most. Mexico also suffered as many farmers went out of business with increased importation of agricultural products from the U.S. The NAFTA has also played a role in the collapse of thousands of SMEs especially in Mexico. Generally, NAFTA has done more harm than good. Evidently, its importance was overrated.

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