The world trade organization has played a significant role in governing the smooth functioning of trade worldwide. The GATT (General Agreement on Tariffs and Trade) and the TBT (technical barriers to Trade) have both helped standardize global trade. Let us analyze the consequences of NAFTA and its impact on the American economy.
The NAFTA and the economic impact on U.S
The NAFTA (North American Free Trade Agreement) is an extensive trade liberalization pact between America, Canada and Mexico, the three North American nations. This agreement, which began in January 1st, 1994, and ends on January 1st, 2008 was aimed primarily at reducing the trade barriers and to facilitate trade cooperation between these nations. Particularly the agricultural sector has benefited immensely from this pact as it allows a stable product and price situation for all commodities irrespective of any accidental and adverse natural conditions. Other than this the United States has free trade agreements with Israel and Jordan. This free trade pact has had a positive impact on US trade performance and economy as a whole.
During the first 5 years of the NAFTA the U.S exports to Canada and Mexico rose steadily averaging an annual growth of 11 percent. The total import and export between the U.S, Canada and Mexico has increased from $293 million in 1993 to $505 million in 1998. This amounts to an increase of over $200 million, which indicates a significant growth in trade. There has been a rapid surge in the U.S exports (to NAFTA nations) since 1993. In 1998 the export of manufactured goods stood at 66%, which is a huge growth, when compared with U.S exports to the rest of the world (47%) at the same period of time. Apparently it is the U.S textile industry, which has been the most benefited from this pact. In 1998 the textile exports to Canada and Mexico stood at $8 billion, which indicates a doubling in exports. The GDP grew by 4.2% in 1999 continuing in the same vein as in 1998 when it was 4.4%. So we see that there is a consistent growth in the American economy after the NAFTA pact was signed.
NAFTA and Employment
It can be seen that the NAFTA pact has helped increase the employment opportunities within the United States. This can be asserted by the fact that before the implementation of NAFTA there was a decrease in the US manufacturing employment of up to 1.3 million (6.8%). Ever since NAFTA was signed there was an addition of 40,0000 jobs in the manufacturing sector. During the period of 1993 to 1998 the hourly and weekly earnings have increased by 5.7% and 6% respectively. According to Delta Woodside Industries Inc, South Carolina,” Due to provisions implemented under NAFTA, we have invested well over $100 million in a new U.S.-based plant and equipment to upgrade our woven textile business in the United States. We now have several new programs with companies which until recently had sourced virtually all of their products from Asia.” So wee see that the NAFTA agreement has significantly boosted the trading prospects of these nations. The American Soyabean Association reports that, “The effects of the NAFTA can be seen on both a micro and macro level. On the micro level, you can now walk into a supermarket in Mexico and see agricultural products produced in the USA. On the macro level, NAFTA generated over $9 billion of agricultural trade between Mexico and the United States in 1996.” We should also consider that the American agricultural export to NAFTA countries is around one fourth of its export to the rest of the world. This has helped the US balance the decrease in exports to the Asian countries and sustain its agricultural growth. The following graphs tell us the economic growth of the US And the other NAFTA countries after the signing of the pact.
The NAFTA agreement has helped strengthen and stabilize the US economy in a significant manner. It has helped the United States to weather the global economic recession from affecting its exports and thereby facilitated a consistent economic surge that is reflected in its growing GDP.