The Economic Impact Of NAFTA’s Policy In The Development Of Mexico Essay Samples
Mexico’s Healthy Policy
Modern development especially in trade has led to the explosion of environmental problems. As a result, there have been healthy issues related to the expansion of markets. Citizens need skills on how to handle environmental issues. Equally, Mexican, US, and Canadian government signed a trilateral agreement which has contributed towards the coming of environmental issues. Since the development and implementation of NAFTA, 1994; Mexico has experienced economic and environmental changes due to the expansion of markets. However, from 1995, economists and analysts have developed a critical eye towards this trade policy. Some say that NAFTA has a negative impact while others stick to the positive changes of this policy. It is undeniable that NAFTA has brought dramatic changes in trade between three countries; Mexico, Canada, and US especially in the widening of trade relations, market expansion and promoting healthy global competition specifically in North America (Cuevas, Messmacher, & Werner, 2005).This policy came into being under three prominent leaders of the time, Bill Clinton (US), Jean Chrétien (Canadian prime minister) and Mexico's president, Carlos Salinas. This deal swept several import tariffs that could hinder effective running of foreign trades. It framed a well-structured process of resolving disputes, set environmentally friendly guidelines and established regional labour.
Section 1: The importance and relevancy of Healthy Policy
The agreement, which brought together North America, used different ways to improve trade industry and healthy safety. Reports from journals show how NAFTA contributed to the emergency of environmental disasters (Durand, 2007). Of these three countries, Mexico before is repeatedly found to be the most damaged or affected. It began with the need for local Mexican farmers wanting to farm more by clearing forests, and there was a huge boom in the mining sector whereby local landowners were affected. It is through these industries and erroneous activities that the pollution of the environment started. It finally translated to health issues. Equally, Mexican citizens were forced to migrant by their movement were not documented by the government. NAFTA agreement wanted to eliminate or reduce barriers to investment, eliminate trade tariffs and set a clear dispute resolution mechanism. It is through these three pillars that led to the positive changes in the economic development in North America specifically Mexico.
Mexico, in particular, has enjoyed the role played by NAFTA. Due to subsidized agricultural products, local people enjoyed a variety of products. It brought in more sophisticated ways of producing and the caring of citizens. In particular, medical industry rose significantly (Durand, 2007). The coming of US medical practitioners combined with what Mexico doctors offer to significantly improve healthy status of their citizens. NAFTA passed on particular rules that are aimed at reducing healthy risks. Trade activities also were customized such that they meet health standards of the region. Economists noted that this deal lowered unemployment rates than it was before 1994. Unemployment crises like low payments, low-productivity jobs, job insecurity and poor working conditions are major aspects that have been abolished via NAFTA policies (Cuevas, Messmacher, & Werner, 2005). Indeed, these changes can as results of removing some restrictions on foreign investors. Investors created employment and unemployment rate significantly dropped from 51% to 39%. Expansion of markets especially in the agricultural sector in turn it improved living standards for Mexican people living in remote areas. As a result, Mexico’s exports increased from 92 billion to 397 billion. Notably, since import tariffs for agricultural products were completely removed, from 1996 onwards, Mexican farmers enjoyed export of their products to these countries. By 2004, it was estimated that Mexico’s export of farm products increased by 39% (Durand, 2007).
Consumption of sugary beverages (attracting high mortality rate and diabetes incidences)
NAFTA is found to contribute to diseases like blood pressure and diabetes. It is through NAFTA policies that Mexico gained trade surplus in export services. From 1998 to 2007, Mexico’s exports to US and Canada had greatly increased from 98 billion in 1998 to 103 billion in 2008. However, since 2008 to date, the increase rate dropped. For instance, in 2012, service export increased only by 22 billion. In addition, prices of foods came down due to increased imports and exports. It encouraged healthy and safe competition that in the long run benefited ordinary Mexican people. Furthermore, untapped resources by then were maximally utilized. Oil and local products are among the products that found new markets. In this way, regional development improved enormously. Local people who initially worked for low paying jobs in small enterprises were able to increase their incomes. This was a blessing in disgust according to many scholars. For instance, beverages with too much sugar were introduced into Mexico. This situation invited diseases like diabetes, blood pressure or heart attack. As a result, mortality rate increased, and many people’s nutrition was negatively affected.
Section 2: Connecting the Policy to the Economics of Development
Definition of two key economic concepts used in this analysis
Human Development Index (HDI) is a special tool in statistics that uses four criteria: years of schooling, life expectancy, and GDP and education level to rank nations’ economic and social development.
Gross Domestic Product (GDP) is generally defined as a monetary value of a country’s annual products and services that were manufactured within its borders.
Measuring NAFTA’s healthy effects on economic development
Healthy effects brought by NAFTA can be directly connected to the development of the economy. Effects of increased clearing of forests, inviting enormous mining and consumption of industrial products had a significant impact on one’s health and the country’s economy. The only technique of understanding the effects brought by NAFTA in the economy is to understand how these effects are measured and quantified. Reasonably, economists attempt to evaluate and measure effects of NAFTA by looking at the economic status of Mexico before the implementation of NAFTA (before 1994) and after the full force of this trade agreement. This was erroneous since some factors were not catered for (Perkins, Radelet, & Lindauer, 2013). Dwight came up with a more sophisticated method of measuring it. NAFTA measurement can be professionally done by watching the effectiveness or productivity generated from specialized production, investments (including foreign), trade and competition (Cuevas, Messmacher, & Werner, 2005). In his case, he highly uses counterfactual simulation whereby he tried to estimate how high growth and trade are in among the Mexican citizens. In doing this, the measurement requires both statistical data derived from the labour department, export, and import rates through interviews and questionnaires. It also entails the extraction of information from employment areas where job losses/gain and level of salaries are measured.
Gross Domestic Product (GDP)
Notably, Mexico relies heavily on its exports. Fortunately, Mexico exports many products to US, which is among the trilateral trade agreement. As per Dwight (1998), the most effective way of quantifying economic progress from the NAFTA’s side is by using GDP per an individual since Mexico was under underdeveloped countries. Looking at this health policy, it has served the three states for more than 20 years. Mexico, in particular, there was a significant increase in the GDP from 1994-2009 (Durand, 2007). It begins by analyzing the individual incomes per year. The end results indicated that GDP had almost doubled under the forces of NAFTA policies. However, two events which are separate from NAFTA have found to affect Mexico’s GDP negatively or positively. They include unilateral trade that boosted its development while the 1995’s currency crisis contributed negative to Mexico’s development.
NAFTA (The northern American free trade agreement) has positively affected Mexico’s economic development through the graph of development is a little shaggy from the GDP figure since the year 1985. It has given a gradual increase in the figure from time to time. A major part of the economy relies on the concentration over exports that happen in the country. NAFTA was able to give a slight lift Mexico from the devaluation of the currency that it had to face. FTA signing gave an excellent start to the county’s economy, and the growth rate of GDP went over 6.2% annually in the period of 20 years, that is, from the year 1960 to 1980. Post this was a crisis that Mexico had to face. GDP went upside down, and it started fluctuating from then on.
Furthermore, NAFTA contributed towards the wellbeing of Mexico citizens. Statistically, from the year 1999 to 2006, Mexico’s exports significantly increased due to the coming of free markets. Indeed, investors from US and Canada came in to exploit untapped resources such as oil and land. Eventually, urbanization and industrialization expanded. With improvement in health and education services, many people especially Mexico’s indigenous people significantly increased their annual income as a result of this free trade.
Human Development index (HDI)
GDP growth came back as it started, and it declined a level and had a drop of 6.2% in the year of 2000. Post this the economic growth of United States affected Mexico positively, and the growth rate gradually started improving. HDI (Human Development Index) growth has shown a positive implant over the years, and it has only gone high each year steadily. On an analysis done over the years taking the graph up from the year 1980, the graph is on a higher note that it has ended recently. All the three factors concluding HDI Life expectancy, Education and GNI per capita has shown a lifting trend through these years (Perkins, Radelet, & Lindauer, 2013). In Mexico, after the implementation of this agreement, life expectancy significantly increased due to positive impacts in the healthy sector. HDI value has increased from a level of 0.595 in the year 1980 to a level of 0.756 as last rated in the year 2013. These two fundamental economic concepts define the point that NAFTA has been favourable in Mexico’s economic development.
In comparing Mexico and the other two nations, Mexico has a fair absolute advantage. This means, their quality products made them shine in this trilateral trade union. However, the financial crisis of 1995 and 1996, which pressurized Mexico, made it fall back in terms of economic development. According to Dwight, measurement of NAFTA effects requires economists and analysts to look at an array of aspects ranging from political influence, foreign investments, and economical conditions before NAFTA throughout to exports and imports of Mexico. In addition, NAFTA led to immigration of worker within these three nations. A country that exported her workers is more likely to face difficulties in terms of quality labour that will lead to the production of quality local product (Kay, 2005).
Section 3: NAFTA’s impact assessment
Mexico’s public healthy
An international journal analyzed the situation in Mexico in 2004-2006 based on the effects of NAFTA. It particularly looked at industries producing beverages in Mexico. NAFTA facilitated to high development of industries in both rural and city areas of Mexico. Specifically, Coca-Cola Company dominated the supplying of beverages. Surprisingly, many beverages like soda had an enormous amount of sugar (Homedes, & Ugalde, 2003). It was uncovered that excess sugars are the main factor that contributed to the rising of many healthy issues like incidences of diabetes, rising obesity, and high blood pressure. Eventually, mortality rates began to rise from 14.5% to 28% as a result of three deadly diseases like diabetes, blood pressure as well as heart attack. Mexico’s food landscape extraordinary changed and people found joy on energy-dense products, which are more dangerous (Homedes, & Ugalde, 2003). According to this journal, scholars have predicted that Mexico, a developing country is most likely to undergo a complete transition in the nutrition sector. In 2005, Mexico was found to consume 173 litres per individual as compared to that of 1994 where consumption rate was 62 litres per individual.
Research repeatedly warned countries that were getting closer to US both culturally and geographically. This country is at risk of incurring obesity incidences. For example, the journal presents a 2011 case study whereby Mexican children who stayed closer to American families in Mexico had high chances of relocating to US. The 2011 study by the University of California uncovers that Mexican children living in America had high chances of becoming overweighed than children living in their motherland, Mexico. All these miseries emerged as result of putting together the three countries in the name of business and integration (Durand, 2007). However, Mexico government established policies that were important in the reduction of health issues among Mexican citizens.
Mining and farming sectors (Environmental effects)
Experts in unity agree that NAFTA created a huge positive and negative impact on mining and agricultural sector. The expansion of markets in 1996-2006 gave local agricultural producers hopes of producing more and more. As a result, Mexico moved towards balanced development because rural people increased their living standard due market expansion (Campbell, 1996). Their products were exported not only to Canada and US but also to other countries creating a good environment for more production. Equally, mining extraordinary improved, and people were willing to increase mining. Oil was transported in huge amounts specifically to us; therefore, Mexico as a country experienced a comparative advantage from 1998-2008. In general, because Mexico depends on agriculture and mining in the development of the economy, economic status rose. GDP per head significantly improved. It is a good indication that NAFTA brought positive changes.
Despite positive changes, expansion of markets encouraged farmers to be engaged in agricultural activities than before. In 1996, illegal activities like excessive clearing of forests were evident. Clearing of forests in turn put more pressure on the environment. The set of industries and companies led to pollution of the atmosphere, Mexican soil and water. In turn, this situation invited many diseases associated with environmental pollution. Therefore, people began to experience difficulties in rural since health services were limited and poor. In addition, mining increased galleries that were exported to US from 102 billion litres to 198 billion litres of oil in 2004 (Campbell, 1996). Expansion of mining forced some people migrant; the government of the time did not document these migrants. People were left hanging, desperate and in poverty. Furthermore, due to excess products of Mexican agricultural products, prices significantly dropped. Statistically, economists indicated that by 2004, prices dropped from 44% in early 1990s to 77% in 2004. This situation forced over 2.3 M Mexican citizens to quit farming. Competition stiffed and every farmer was looking for the best alternatives.
NAFTA encouraged migration of human resource from Mexico to US. In addition to the foreign culture importation, Mexico was at high risk of loosing important and qualified personnel to Canada or US. This situation did not boost Mexico’s economy in any way; instead, it put the country into an array of risks. Workers who moved to US for better jobs were frustrated with low salaries (same case like in their home country); it brought a total embarrassment to the individuals.
Production of drugs
Publicly, NAFTA was geared towards establishing friendly markets between countries. Ironically, this trilateral agreement has made Mexico a good place for trafficking and drug production. Although the trade increased as a result of liberalized NAFTA policies, there has been poor and weak job creation. It in turn threw 25% of rural people in extreme poverty while 48% of citizen lived in poor standards. People moved to the drug trade to better their living standards. Although the drug trade was illegal, trafficking and production of drugs kept on until the coming of Felipe Calderon as president who publicly declared a war against the production and trafficking of drugs in Mexico. End results were the increment of crimes and killings especially in urban areas. In 2002, security of the country was under threat; foreign investors find it hard to put businesses in Mexico (Campbell, 1996). Drug abuse in turn invited other evils in Mexican society such as robbery, homicides and the demolition of businesses. Undeniably, NAFTA remains the main pillar for economic growth in the country. It changed the face of the economy by improving industrial investments, expansion of markets and removed of export and import restrictions.
Today, economist and researchers feel that NAFTA is bringing more harm than positive changes to Mexico. This trilateral agreement has invited many social, cultural and economic crises in Mexico. To eradicate this; a number of actions should be undertaken. Firstly, it is advisable for the three governments to come together and transform NAFTA policies by considering the current situations in the three nations. Policies that seem to favour one country at the expense of another nation should be removed or changed. Secondly, Economists and analysts from both countries should be incorporated in the implementation and formation of NAFTA rules. In this way, this trilateral agreement will be effective and useful to both countries. Thirdly, it is high time to avoid political influence to NAFTA laws. Politics are dynamic and can change every sector all of sudden, this means, countries depending on common trade agreement are most likely to suffer. Each country needs to be dedicated towards the creation of a safe environment for foreign and local investors. Clear models of measuring the effects of NAFTA should be implemented in an attempt to vividly understand the negative and positive of this trade agreement. In doing so, important changes will be taken to allow effective use of NAFTA policies.
Campbell, A. J. (1996). The effects of internal firm barriers on the export behavior of small firms in a free trade environment: evidence from NAFTA. Journal of small business Management, 34(3), 50.
Cuevas, A., Messmacher, M., & Werner, A. (2005). Foreign direct investment in Mexico since the approval of NAFTA. The World Bank Economic Review, 19(3), 473-488.
Durand, C. (2007). Externalities from foreign direct investment in the Mexican retailing sector. Cambridge Journal of economics, 31(3), 393-411.
Homedes, N., & Ugalde, A. (2003). Globalization and health at the United States-Mexico border. American Journal of Public Health, 93(12), 2016-2022.
Kay, T. (2005). Labor Transnationalism and Global Governance: The Impact of NAFTA on Transnational Labor Relationships in North America1. American Journal of Sociology, 111(3), 715-756.
Perkins, D., Radelet, S., & Lindauer, D., (2013). Economics of Development, 7th Edition, Norton Press.