The Impact of North American Free Trade Agreement on Mexico
Abstract
Trading blocs are imperative for the purpose of opening markets and boosting economic growth. Most of regions in the world have come together for the purpose of addressing issues of increasing trade. The North American Free Trade Agreement (NAFTA) forms quite an Integral part in the history of Mexico. The government of United States, Canada and Mexico signed the agreement which led to the creation of trilateral trade in the region of North America. It was in the year 1994 dated January 1st that the agreement was implemented. Herein focus is laid upon the changes that the NAFTA agreement brought to the history of Mexico. This agreement culminated in increased benefits but also problems within the society. For instance, the expantion of large businesses affected small and medium Enterprises (SMEs) negatively. Though the agreement resulted in increased productivity, it also resulted in unemployment amongst those who could not afford to compete favorably.
Impact of agreement on Mexico
To begin with, the agreement positively impacted on Mexico bringing change in the process of combating the economic crisis that was in Mexico in the years 1994-95. In connection to this NAFTA resulted to a fall in the rates of poverty as well a rise in real income through lowered prices for instance those of food. On the same note NAFTA affected Mexican farmers due to the fact that cheap imports resulted to lowered food prices leading to a limited market for their locally produced foods or rather agricultural products. The negative effects of the agreement created problems mostly for people with small and medium businesses. This is owes to the fact that such people were not in a position to compete effectively. For instance, while the large enterprises would be in a position to reduce the cost of food, it became unbearable for the small and medium enterprises. Industries are able to lower prices due to the benefit of mass production. Secondly, technological advancement that ensued benefitted large enterprises more.
Removal of trade tariff
Tarriffs act as main hindrances to trade in the market. This is especially when they are high. They tend to push some businesses out of market. Small and medium enterprises are the most affected when the issue of tariff is not addressed. The NAFTA agreement resulted to open trade whereby tariffs were ended on various goods and services as well as the implementation of equality between Mexico, Canada and USA. NAFTA enabled for the existence of tariff-free goods for instance agricultural products such as meat, corn and eggs. Additionally due to the existence of the agreement factories in Mexico that import raw materials for the production of export products turned into a trade landmark. This was quite a positive change for the Mexican industry. However due to the free trade small producers of raw materials were affected undergoing the threat of elimination since prices fell as raw materials and goods were now largely and cheaply available in the Mexican industry. This …