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NAFTA Class Presentation

NAFTA Class Presentation. By Théo Le Morvan 14 th of November 2012. Contents. What is a Trade bloc ? What is NAFTA ? Consequences of NAFTA on USA and Mexico Advantages Disadvantages Conclusion. 1. What is a Trade bloc ?.

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NAFTA Class Presentation

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  1. NAFTA Class Presentation By Théo Le Morvan 14th of November 2012

  2. Contents • Whatis a Trade bloc ? • WhatisNAFTA ? • Consequences of NAFTA on USA and Mexico • Advantages • Disadvantages • Conclusion

  3. 1. What is a Trade bloc ? • A Trade Bloc is a group of countries that share trade agreements between themselves. • Its objectives: stimulate trade to obtain benefits from economic co-operation

  4. Economic integration We recognise 6 main stages that add up to fill a complete economic integration • Free trade areas • Customs unions • Common markets • Customs and monetary unions • Economic unions • Economic and monetary unions

  5. Economicintegration stages Economicand monetary union (CSME/EC$, EU/€) Economic union  (CSME, EU) Customs and Monetary Union  (CEMAC/franc, UEMOA/franc) Common market (EEA, EFTA, CES) Customs union (CAN, CUBKR, EAC, EUCU, MERCOSUR, SACU) Free Trade Area(AFTA, CEFTA, GAFTA, NAFTA, SAFTA, etc.)

  6. A little bit of history... • 1sttrade bloc was the “German customs union” initiated in 1834. • 1947: the General Agreement on Tariffs and Trade (GATT) was created shortly after World War II, between twenty-three countries, to facilitate and coordinate trade between the nations. • 1951: EEC European Economic Community formed by the 6 first countries • In 1995, during the Uruguay round of GATT negotiations, the World Trade Organization (WTO) was created • The Maastricht Treaty established the European Union under its current name in 1993 • 1994 beginning of NAFTA • In 1997, more than 50% of all the world commerce is conducted by trade blocs.

  7. Similarities between members of Trade Blocs • Need to improve level of business • Similar level of GNP per capita • Geographical proximity • Similar trading regimes • Similar political commitments and willingness

  8. 2. NAFTA • NAFTA is short for the North American Free Trade Agreement. • NAFTA exists between Canada, the U.S.A and Mexico making it the world’s largest free trade area (in terms of GDP). • NAFTA was launched 20 years ago to reduce trading costs, increase business investment, and help North America become more competitive in the global marketplace.

  9. 2. Why NAFTA ? • To eliminate barriers to trade and facilitate the cross-border movement of goods and services. • To promote conditions of fair competition. • To increaseinvestmentopportunities. • To provide protection and enforcement of intellectual property rights. • To create procedures for the resolution of trade disputes.

  10. Trade flows in NAFTA

  11. 2. NAFTA’s main benefits • By eliminating tariffs it: • reduces inflation by decreasing the cost of imports. • creates agreements on international rights for business investors • reduces the cost of trade, which boosts investment and growth especially for small businesses. • forces companies to adopt higher foreign standards and business practices. • Such processes will gradually improve the global competitiveness of businesses.

  12. 2. NAFTA’s advantages (1/2) • NAFTA increased trade in Goods and Services: • By 2007, exports from the U.S. to Canada and Mexico had grown from $142 billion to $452 billion. • Exports from Canada and Mexico to the U.S. had increased from $151 billion to $568 billion. • NAFTA boosted Farm Exports: • U.S. agricultural exports to Mexico grew from 15% of total U.S. farm exports in 1993 to 24% in 2007. • Mexican exports to U.S. and Canada nearly doubled since 1993, growing by 156% compared to a 65% growth with the rest of the world. • NAFTA increased Services’ Profits • More than 40% of U.S. GDP is created through service industries. • NAFTA boosted U.S. service exports to Mexico from $15 billion in 1993 to $52 billion in 2007.

  13. 2. NAFTA’s advantages (2/2) • NAFTA led to an increase in US Employment: • U.S. employment rose from 110.8 million in 1993 to 137.6 million in 2007, increase of 24 %. • The U.S. unemployment rate averaged 5.1 % for the first 13 years after NAFTA, compared to 7.1 % during the 13 years prior to the agreement. • NAFTA reduced Oil and Grocery Prices: • Since NAFTA eliminates tariffs, oil prices are lower and USA can import Mexican oil for less than from elsewhere. • The same is true for food imports. • NAFTA Increased Foreign Direct Investment: • Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Mexico has more than doubled to $237 billion in 2009.

  14. NAFTA’sstatistics

  15. 3. NAFTA also shows disadvantages (1/2) • U.S. Jobs Were Lost: • As labor is cheaper in Mexico, manufacturing industries moved their production from high-cost U.S. states to Mexico. • Between 1994 and 2010, the U.S. trade deficits with Mexico totaled $97.2 billion, which led to 682,900 layoffs in the US. • Nearly 80% of the losses were in manufacturing. • U.S. Wages Were Suppressed: • US companies moved from northern states to southern states where the labor costs were cheaper. • The workers had their wages growth suppressed. • Between 1993 and 1995, 50% of all companies suppressed wages. • By 1999, that rate was 65%. • Mexico's Farmers Were Put Out of Business: • Mexico lost 1.3 million farm jobs • Rural Mexican farmers were forced to start to produce nuts, peaches, olives, cucumbers, watermelons, etc. • Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001.

  16. 3. NAFTA also shows disadvantages (2/2) • Maquiladora Workers Were Exploited: • NAFTA expanded the maquiladora program • This represents 30% of Mexico's labor force. • Workers have "no labor rights or health protection, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job." • Mexico's Environment Deteriorated: • Mexican agricultural sector have to use more fertilizers and other chemicals, that all contribute to pollution. • Deforestation of 630,000 hectares per year.

  17. Conclusion • The opinion about NAFTA remains divided. • Analysts say it is too early yet to judge NAFTA’s impact • It is urgent to treat is the exploitation of the Mexican human and environmental resources. • US withdrawing from the international trading system would allow the European Union and fast-growing Asian countries to take the lead in trade negotiations. • Mexico will become an ever-more attractive destination for foreign investment. • United States needs to stay in NAFTA to ensure economic growth and a dynamic economy in the future.

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