Wednesday, December 18, 2013

NAFTA, Trade Blocs, and Consumer States

The North American Free Trade Agreement (NAFTA) was implemented on the first day of 1994 and included the major North American states of the United States, Canada, and Mexico and has created the globe’s largest area of free trade. The main premise of NAFTA was the agreement that “each Party shall progressively eliminate its customs duties on originating goods” (NAFTA, 1994) and that “each Party shall accord most-favored-nation duty-free treatment to any local area network apparatus imported into its territory” (NAFTA, 1994). The first impacting consideration pertaining to the elimination of tariffs in the name of so-called free trade is the ability of private sector corporations to manufacture products in developing post-colonial states, such as Mexico, where wages are much lower than in the U.S., which is the consumer of the majority of manufactured products. The elimination of tariffs allows for the movement of goods and capital across state borders with no tariffs being charged to state or private sector.

One of the largest areas of the agreement is in the field of agriculture. According to the United States Department of Agriculture, “From 1992-2007, the value of U.S. agricultural exports worldwide climbed 65 percent. Over that same period, U.S. farm and food exports to our two NAFTA partners grew by 156 percent.” (USDA, 2008). During the same time period, “Canada had been a steadily growing market for U.S. agriculture under the U.S.-Canada Free Trade Agreement (CFTA), with U.S. farm and food exports reaching a record $11.9 billion in 2006, up from $4.2 billion in 1990” (USDA, 2008). While tariff elimination between the United States and Canada were completed under the CFTA, the complete elimination of agricultural tariffs between U.S. exports and Mexico were not completely established until January of 2008 (USDA, 2008).

The amount of exporting and importing involved in the private manufacturing sector is also a very important aspect of this so-called trading bloc.  In order to attempt to view the NAFTA bloc for what it is, it is important to focus on the privaye sector, excluding military sales, defense, and government sales, spending which is predominately from private sectors manufacturing in foreign states, the following statistics should be considered:

U.S. outgoing so-called investment capital:

U.S. foreign direct investment (FDI) in NAFTA Countries (stock) was $357.7 billion in 2009 (latest data available), up 8.8% from 2008 (Office of the U.S. Trade Representative, 2013).

U.S. direct investment in NAFTA Countries is in nonbank holding companies, and in the manufacturing, finance/insurance, and mining sectors (Office of the U.S. Trade Representative, 2013).

Incoming so-called investment into U.S.:

NAFTA Countries FDI in the United States (stock) was $237.2 billion in 2009 (latest data available), up 16.5% from 2008 (Office of the U.S. Trade Representative, 2013).

NAFTA countries direct investment in the U.S. is in the manufacturing, finance/insurance, and banking sectors (Office of the U.S. Trade Representative, 2013).

These statistics are based on private sector corporations that import materials into Mexico for low wage manufacturing to create products that are imported into the United States for consumption at maximum profit. The question is…how do the exemption of tariffs and the promotion of so-called free trade blocs build revenues for the state? The creation of more jobs in the service industry for developed consumer states and more low wage manufacturing jobs for so-called developmental states? Collection of sales tax on individual consumers of consumer states instead of the state accumulation of tariffs on the private sector? What happens to a state when its population ceases to be a consumer state?

North American Free Trade Agreement. January 1, 1994. Accessed on December 17, 2013. http://www.worldtradelaw.net/CBBD1ABA-923D-466C-A327-3DA533B6CA2C/FinalDownload/DownloadId-5BE31FBEADDCF208D18A5FDD0720CD7A/CBBD1ABA-923D-466C-A327-3DA533B6CA2C/fta/agreements/nafta.pdf

Office of the United States Trade Representative. 2013. North American Free Trade Agreement (NAFTA). Accessed December 17, 2013. http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta

United States Department of Agriculture. 2008. Fact Sheet: North American Free Trade Agreement (NAFTA). Accessed on December 17, 2013. http://www.fas.usda.gov/info/factsheets/NAFTA.asp

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