Katy Haas

Coordinator, Alianzas www.alianzas.us

Index
Why Enter a Free Trade Agreement? What is NAFTA? Background of NAFTA Reaction after Implementation The Mexican Peso Crisis What about Americas Farmers?

 Impact on:
Employment Immigration Environment

Trucking industry Missouris role NAFTAs future Conclusion

Mexico is the most important country to the United States in the 21st century
--President George W. Bush Sept. 5, 2001

Why Enter a Free Trade Agreement?

Mexico production (in tons) 9 6 3 0 3 5 7 9 United States production (in tons) Corn Sugar

Levels of Economic Integration

Type of Bloc Free-trade area Customs union Common market Economic union Free Trade among the Members           Common External Tariffs Free Movement of Factors of Production (Example: free labor movement between countries) Harmonization* of All Economic Policies - Fiscal, Monetary, etc. (Example: common currency)

*If the policies are not just harmonized by separate governments, but have a unified government with binding commitments on all members, then you reach political integration and have full economic integration.

What is NAFTA?
Effective as of January 1, 1994 A trade agreement between CANADA, MEXICO, and the UNITED STATES which provides for the elimination of tariffs on North American goods shipped among the three countries.

Background of NAFTA An Introduction

Salinas

Clinton

Zedillo

Marcos

Expectations and Goals

MEXICO: Lower inflation and foreign debt; create more wellpaying jobs for Mexicans, thus producing less incentive for Mexicans to work illegally in the U.S.; Mexico would become a richer market for American exporters. UNITED STATES: Would solidify an expanding trade relationship, which would spur job creation at home and help to continue the revolutionary shift throughout Latin America away from state controlled markets toward freer markets. Would exert presidential authority, improve inter-American relations and advance the cause of global trade liberalization.

Reaction After Implementation

How the Countries Were Affected Immediately How They Are Affected Now

Top U.S.
and
1. Motor Vehicles 2. Oil/Natural Gas 3. Motor Vehicle Parts 4. Semiconductors 5. Electronic Parts 1. Aircraft 2. Electronic Computing Equipment 3. Motor Vehicle Parts 4. Motor Vehicles 5. Semiconductors 6. Aircraft/Space/Missile Parts 7. Chemicals 8. Plastics 9. Airplane Engines/Parts 10. Refined Petroleum Products

NAFTA Pros
+ Goods/Services at lower cost + Most underdeveloped countries gain the most (i.e. standards of trade increased) + Tariffs reduced + Jobs created + Mexicos economy is growing again

NAFTA Cons
Fuel for peso crisis Benefits Mexico more than the U.S. U.S. deficit with trading partners Loss of low-wage American jobs to Mexico Environmental problems Traffic congestion and delays along the borders

The Mexican Peso Crisis

Was NAFTA to Blame? Wages in United States and Mexico

What about Americas Farmers?

BENEFITS: More export opportunities. Since NAFTA was approved in 1993, U.S. agricultural exports to Mexico have nearly doubled. DISADVANTAGES: Face regulations that increase the costs of production while foreign competitors gain from cheap production and labor.

Impact on: Employment

Was U.S. workers loss Mexican workers gain? Maquiladora - Primarily foreign-owned assembly plants Jobs lost to Mexico vs. Jobs supported by exports to Mexico and Canada

Impact on: Immigration

In the 1990s, U.S. population grew 13.2%, with 60% growth of Mexican immigrants. Among Latinos nationwide, 26% are between the ages of 25-40. Remittances from Mexicans working in the U.S.: $6.65 billion (for 2001 through 3rd quarter) Increase in Mexican migrants led to increase in Border Patrol staff

Impact on: Environment

NAFTA Environmental Agreements: North American Agreement on Environmental Cooperation (NAAEC) - commission to enforce environmental law. Border Environment Cooperation Commission and the North American Development Bank commission to address pollution problems along the U.S.-Mexican border

Trucking Industry
The areas of concern include: vehicle safety, driver training, environmental issues and possible illegal drug trafficking.
A recent investigation determined that the average 18-wheeler in Mexico is 40% overloaded, carrying a gross vehicle weight of more than 120,000 pounds. If U.S. truckers operated at a similar overcapacity, interstate highways would have a life span of 14 years, as opposed to their 40-year design life.

Missouris Role
Missouri's Expor s Under NAFTA
3500 3000 2500 2000 1500 1000 500 0 1993 1994 1995 1996 1997 1998 1999 Mexico Canada Millions of Dollars

Missouris Role (continued)

Between 1994 and 1999, Missouri exports to NAFTA partners increased 63.4%. Canada and Mexico are Missouris first- and secondlargest export markets, respectively, accounting for 50.5% of Missouris total exports 1999.

Mid-Continent International Trade Corridor

1. A trade pattern 2. A system of connecting highways and rail routes 3. An opportunity to strengthen economic development in a region

Missouri and Employment

nemploymen Ra e n 1993-1999
8 7 6 5 4 3 2 1 0
6.5 4.9 4.8 4.6 4.2 4.2 3.4

ssou ,

Pe cen

1993 1994 1995 1996 1997 1998 1999

The Missouri-Mexico Partnership

The Missouri Department of Economic Development moved its hub to Monterrey Branch office in Guadalajara For the past 12 years, the Missouri Department of Agricultures headquarters has been in Guadalajara

NAFTAs Future
Where is it going and what effects will it have? U.S.-Central American Free Trade Agreement Free Trade Area of the Americas (FTAA)

Conclusion

2220 Holmes, Third Floor Kansas City, MO 64108 (816) 235-5840 (816) 235-1762 FAX www.alianzas.us