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What were the limitations of NAFTA? How did its replacement by the United States-Mexico-Canada Agreement counter them? Explain. 15 Marks. (UPSC CSE Mains 2024- Political Science and International Relations, Paper 2).
NAFTA (North American Free Trade Agreement), is a tripartite trading bloc of countries of North America among the United States, Canada, and Mexico. It focused on eliminating trade tariffs on agricultural products, automobiles, and textiles. This agreement also protected intellectual property rights and removed the restrictions on investment among these three countries. It has also deepened the political relationship among the three signatory countries.
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NAFTA played a critical role in transforming trade relationships between the United States, Mexico, and Canada by removing barriers, boosting economic growth, and fostering stronger cross-border ties. While the agreement brought numerous benefits such as increased trade and job creation, it also faced challenges like
- NAFTA led to the loss of U.S. manufacturing jobs.
- Many jobs were taken by workers in Mexico.
- NAFTA negatively impacted the economic prospects of Mexican small business owners and farmers.
- After the agreement, many small farmers found it difficult to compete with bigger agribusinesses.
NAFTA’s replacement, the USMCA, aimed to address these issues with modern provisions for digital trade, labor rights, and environmental protections. Overall, NAFTA laid the groundwork for economic integration in North America, with lasting effects on regional trade dynamics.
|
NAFTA |
USMCA |
|
|
Automotive |
62.5% of vehicle parts must be made in U.S., Mexico, or Canada |
75% of vehicle parts must be made in U.S., Mexico, or Canada |
|
Dairy |
No tariffs on most goods |
Keeps no tariff provision but also opens up Canadian and U.S. dairy markets |
|
Environment |
Environmental requirements difficult to enforce |
Provision to apply $600 million to tackle environmental problems |
|
Labor |
Lower wages sent jobs to Mexico |
Enhancements to U.S. labor laws to make them more competitive |
|
Technology |
No provisions for digital trade |
U.S. companies are no longer required to store data on domestic servers |
The USMCA is built upon and aims to improve provisions that were written into NAFTA. Some of the major changes that were ushered in with the USMCA include open trade between the U.S. and Canadian dairy markets, enhancements to labor laws (when lower wages helped push jobs to Mexico under NAFTA), and increasing the percentage of motor vehicle parts required to be produced in the region.
POSTED ON 15-02-2025 BY ADMIN
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