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The North American Free Trade Agreement's impact on United States employment has been the object of ongoing debate since the 1994 inception of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. NAFTA's proponents believe that more jobs are ultimately created in the USA. They point to factors such as growth in the export industry and lower unemployment rates as evidence of NAFTA’s benevolence to U.S. workers. Opponents see the agreements as costly to well-paying American jobs in the short run. Declines in employment opportunities within manufacturing industries and increases in trade deficits are some of the negative side effects of NAFTA pointed out by the critics...
Job loss
NAFTA's opponents attribute much of the displacement caused in the US labor market to the United States’ growing trade deficits with Mexico and Canada. According to the EPI, the widening of the deficit has caused the dislocation of domestic production to other countries with cheaper labor and supported the loss of 879,280 US jobs.[9] Critics see the argument of the proponents of NAFTA as being one-sided because they only take into consideration export-oriented job impact instead of looking at the trade balance in aggregate. They argue that increases in imports ultimately displaced the production of goods that would have been made domestically by workers within the United States.[9]
The export-oriented argument is also critiqued because of the discrepancy between domestically-produced exports and exports produced in foreign countries. For example, many US exports are simply being shipped to Mexican maquiladores where they are assembled, and then shipped back to the U.S. as final products.[9] These are not products destined for consumption by Mexicans, yet they made up 61% of exports in 2002. However, only domestically-produced exports are the ones that support U.S. labor. Therefore, the measure of net impact of trade should be calculated using only domestically-produced exports as an indicator of job creation.
78% of the net job losses under NAFTA, 686,700 jobs, were relatively-high paying manufacturing jobs.[9] Certain states with heavy emphasis on manufacturing industries like Michigan, Ohio, Pennsylvania, Indiana, and California were significantly affected by these job losses. For example, in Ohio, TAA and NAFTA-TAA identified 14,653 jobs directly lost due to NAFTA-related reasons like relocation of U.S. firms to Mexico.[10] Similarly, in Pennsylvania, Keystone Research Center attributed 150,000 job losses in the state to the rising U.S. trade deficit.[11] Since 1993, 38,325 of those job losses are directly related to trade with Mexico and Canada. Opponents point out the fact that although most of these jobs were reallocated to other sectors, the majority of workers were relocated to the service industry, where average wages are 4/5 to that of the manufacturing sector.[9]
Opponents also argue that the ability for firms to increase in capital mobility and flexibility has undermined the bargaining power of U.S. workers. Fifteen percent of employers in manufacturing, communication, and wholesale/distribution shut down or relocated plants due to union organizing drives since NAFTA’s implementation.[12] The weakening of rights for the American labor force is one example of the “race to the bottom” theory advocated by most opponents that will result from these trade policies. Ultimately, workers are faced with the dilemma of settling for less worker’s rights because the firm always will have the ability to relocate to another country, notably Mexico, where they can attain cheaper labor and will face less resistance from workers.[citation needed] However, it is now common that these incentives are enough to cost American laborers their jobs regardless of the status of the labor unions.
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Job loss
NAFTA's opponents attribute much of the displacement caused in the US labor market to the United States’ growing trade deficits with Mexico and Canada. According to the EPI, the widening of the deficit has caused the dislocation of domestic production to other countries with cheaper labor and supported the loss of 879,280 US jobs.[9] Critics see the argument of the proponents of NAFTA as being one-sided because they only take into consideration export-oriented job impact instead of looking at the trade balance in aggregate. They argue that increases in imports ultimately displaced the production of goods that would have been made domestically by workers within the United States.[9]
The export-oriented argument is also critiqued because of the discrepancy between domestically-produced exports and exports produced in foreign countries. For example, many US exports are simply being shipped to Mexican maquiladores where they are assembled, and then shipped back to the U.S. as final products.[9] These are not products destined for consumption by Mexicans, yet they made up 61% of exports in 2002. However, only domestically-produced exports are the ones that support U.S. labor. Therefore, the measure of net impact of trade should be calculated using only domestically-produced exports as an indicator of job creation.
78% of the net job losses under NAFTA, 686,700 jobs, were relatively-high paying manufacturing jobs.[9] Certain states with heavy emphasis on manufacturing industries like Michigan, Ohio, Pennsylvania, Indiana, and California were significantly affected by these job losses. For example, in Ohio, TAA and NAFTA-TAA identified 14,653 jobs directly lost due to NAFTA-related reasons like relocation of U.S. firms to Mexico.[10] Similarly, in Pennsylvania, Keystone Research Center attributed 150,000 job losses in the state to the rising U.S. trade deficit.[11] Since 1993, 38,325 of those job losses are directly related to trade with Mexico and Canada. Opponents point out the fact that although most of these jobs were reallocated to other sectors, the majority of workers were relocated to the service industry, where average wages are 4/5 to that of the manufacturing sector.[9]
Opponents also argue that the ability for firms to increase in capital mobility and flexibility has undermined the bargaining power of U.S. workers. Fifteen percent of employers in manufacturing, communication, and wholesale/distribution shut down or relocated plants due to union organizing drives since NAFTA’s implementation.[12] The weakening of rights for the American labor force is one example of the “race to the bottom” theory advocated by most opponents that will result from these trade policies. Ultimately, workers are faced with the dilemma of settling for less worker’s rights because the firm always will have the ability to relocate to another country, notably Mexico, where they can attain cheaper labor and will face less resistance from workers.[citation needed] However, it is now common that these incentives are enough to cost American laborers their jobs regardless of the status of the labor unions.
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