We've all heard about NAFTA, the North America Free Trade Agreement. It's a big deal, so we'll break it down into five pros and cons.

Pros

1. NAFTA Reduced Costs
Proponents of free trade typically cite lower prices for consumer items as one of the critical advantages that reduced tariffs can offer Americans. NAFTA supporters claim that as a result of cheaper prices, the typical American has benefited. The American economy benefited from lower prices, which also increased spending power.

2. Small Businesses Flourished
As a result of NAFTA, small businesses have flourished in North America. Companies can import goods from Mexico and Canada duty-free and export goods to them duty-free as well. Small businesses in the United States can compete more effectively against larger companies with lower overhead costs.

3. NAFTA Helped the GDP
According to the Council on Foreign Relations (CFR), following implementation, NAFTA increased the U.S. GDP by 0.5%, or roughly $80 billion. That translates to an annual GDP increase of a few billion dollars. The allocation of those additional billions may have drawn criticism from opponents, but when the U.S. economy is considered as a whole, NAFTA appears to have boosted it.

4. NAFTA Benefited Foreign relations
One justification frequently used to support free trade and NAFTA is improved diplomatic ties between nations. In other words, the hypothesis holds that countries with more economic ties are less likely to engage in diplomatic or armed confrontation. It is asserted that NAFTA led to more frequent meetings and a larger value placed on diplomatic relations between the United States, Canada, and Mexico heads of state.

5. NAFTA Boosts Exports
NAFTA caused some U.S. economic sectors to suffer (more on that later), but it also helped others. The CFR estimates that NAFTA helped create roughly 200,000 export-related jobs each year. These positions pay 15% to 20% higher than the manufacturing positions that left the United States after NAFTA. Even in the industrial sector, NAFTA encouraged cooperation between nations, giving rise to new, regional businesses in which various parts are produced in the different signatory countries. According to some observers, this has helped North America compete with Asian industrial powerhouses.

Cons

1. Loss of Manufacturing Jobs
NAFTA critics and those who oppose future trade agreements point to the loss of manufacturing employment in the United States as evidence for their arguments. According to the CFR, the U.S. car industry shed almost 350,000 jobs between 1994 and 2016. Many of those positions were filled by employees in Mexico, where the automotive sector added over 400,000 employees during the same period.

2. Suppressed Economic Growth of Mexican Small-scale Farmers and Entrepreneurs
Other critics of NAFTA focus on how it affected Mexico's small farmers, many of whom found it difficult to compete with bigger agribusinesses after the agreement. Farmers from some of the nation's family-run farms moved to work in factories instead, where, according to detractors, they were paid less, had less freedom, and had worse working conditions.

3. Cutdown Some American Employee Salaries
The U.S. economy's manufacturing sector had the greatest employment losses due to NAFTA, but salaries fell across many industries where a college degree is not required. The competition from Mexican employees, whose earnings are generally lower than those of American workers, also has a low impact on U.S. wages.

4. Stringent Environmental and Labor Requirements
When the United States negotiates trade agreements with middle- or low-income nations, American negotiators frequently demand stronger labor, environmental, and intellectual property standards than those previously enforced. However, detractors of NAFTA claim that the United States missed an opportunity to advance the pro-labor and pro-environment agendas by failing to press hard enough for strict protections for employees and the environment during the deal-making process.

5. Immigration Concerns
Opponents of NAFTA have argued that it has led to immigration concerns, particularly in Mexico, where pay drops mean workers have to leave the country in search of greener pastures.

Conclusion

Regardless of your opinion on NAFTA, it has pros and cons. As part of an economic trade program, it's necessary to fix these problems to facilitate better economic trade between Mexico, Canada, and the United States.

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