Exam 9: Regional Trade Pacts Give the Mexican Auto Industry an Edge

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NAFTA is a free trade agreement between the United States,Canada,and Mexico.When the agreement was initially proposed in 1988,there was much debate as to whether the agreement should be ratified.Proponents of NAFTA argued that NAFTA should be seen as an opportunity to create an enlarged and more efficient productive base for the entire North American region.They argued that while some lower-income jobs would move from the United States and Canada to Mexico,new jobs would be created in the U.S.and Canada as economic growth occurred in Mexico as a result of the job transfers.In addition,the international competitiveness of U.S.and Canadian firms that move production to Mexico to take advantage of lower labor costs will be enhanced,enabling them to better compete against Asian and European rivals.Those that opposed NAFTA claimed that U.S.and Canadian citizens would lose their jobs in alarming numbers as low-income positions were moved to Mexico to take advantage of lower wage rates.Environmentalists also voiced concerns about NAFTA.Because Mexico has more lenient environmental protection laws than either the U.S.or Canada,there was concern that U.S.and Canadian firms would relocate to Mexico to avoid the cost of protecting the environment.Finally,there was opposition in Mexico to NAFTA from those who feared a loss of national sovereignty.Mexican critics feared that NAFTA would allow their country to be dominated by U.S.and Canadian multinationals,and Mexico would be used as a low-cost assembly site,while keeping their higher-paying jobs in their own countries.