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Lecture

W4 NAFTA.docx

3 Pages
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Department
Economics
Course Code
ECON 255
Professor
Ashok Kotwal

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Reading Week 4: NAFTA [VIDEO 1: NEED TO KNOW | AFTER NAFTA] − first passed by the Bush Administration and then the Clinton Administration − purpose: to spur economic growth by eliminating most tariffs on export and import  as a result, goods will be more affordable − Critics:  The low cost makes doing business abroad too attractive  so, American manufacturing job has been ‘disseminated’ − Report on Midwestern City (Evansville) After NAFTA by Rick Carr  Whirlpool – region’s biggest employer  But, its manufacturing was then transferred to Mexico  immediate impact: people in Evansville lose their job  this is largely due to the cheap wage offered by the Mexicans  Liberal Economic Policy’s Estimates the trade relation with Mexico will eliminate 24K jobs in Indiana alone  but at a national level, it will be close to 700K jobs  Rebuttal from US Chamber of Commerce: American farms were able to increase their exports to Mexico and it pays for 1.7 mil jobs  Mayor’s Opinion  Evansville’s economy is manufacturing-based  the movement to find cheaper wage rate and lower environmental standard is not a new thing  and it was accelerated by NAFTA which allows the business across the borders easier  instead of having to pay tariffs when manufacturing occurred from (US  Mexico) to and (Mexico  US), the tariffs paid when crossing the border twice are eliminated  Despite the outsourcing, some of the companies in Evansville still remain  Example: Red Spot, a paint producing company: before NAFTA, it had to pay tariffs for every gallon of paint it exported to Mexico, but after NAFTA, the price of their paints became cheaper and this spurred demand from the Mexican farms, so, Evansville was able to employ more workers to fulfill the demand  NAFTA is also good for American agriculture industry because it eliminated a 200% tariffs on American-grown corn, so commodity in Mexico is a lot cheaper and this helps farmers to produce their export  The Development of NAFTA Super Highway  connects Canadia Highway in the North and Mexico in the South: this highway itself is designed to make it easier for business owners to send their goods to the consumers  Economist Muhd Qayyum: consumers are the greatest benefit from NAFTA  can enjoy more products at a greater quality at a lower price  Focus: Is the job loss in the US to the workers in Mexico a very big concern? Because they react to it since their stakes are impacted negatively. As for those who are benefited, they don’t see the need to organize and
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