The North American Free Trade Agreement: Impact on U.S. Local Economies and Employment Opportunities

Posted: 7 Mar 2008 Last revised: 31 Mar 2008

Date Written: 3/20/08

Abstract

The North American Free Trade Agreement (NAFTA) was signed by President William Jefferson Clinton in 1992. Although NAFTA is a trade and tariff initiative it has profound consequences for labor and the U.S. economy. Since its implementation NAFTA has resulted in the permanent elimination of more than 766,000 employment opportunities for non-degree U.S. workers, compelled various manufacturing companies to relocate to Mexico, increased the trade deficit between the U.S. and Mexico on several occasions since 1994 and led to a decline in real wages among both U.S. and Mexican workers. While the goal of NAFTA is to reduce trade barriers between three nations, the United States, Canada and Mexico, the goal of this research endeavor is to determine the impact of NAFTA on local economies, employment opportunities in specific industries and on wages in the U.S. The premise behind this study is that reducing trade barriers increases competition among manufacturers in the three nations involved and forces U.S. manufacturers to reduce production costs in various ways. The reduction in trade barriers, particularly between the U.S. and Mexico, forces U.S. manufacturers to compete in the market place against a nation with poor labor standards and lower overhead. This clearly has profound consequences for U.S. workers, local economies and employment opportunities. This paper is an attempt to better understand and objectively assess the impact of NAFTA on U.S. workers. This paper relies on multiple statistical procedures including regression analysis to determine the strength of the relationship between the NAFTA legislation and key indicators specific to American workers and local economies.

Keywords: NAFTA, U.S. economy, Bill Clinton, American Workers, manufacturing, labor standards, trade barriers, trade deficits, labor standards, U.S. unemployment

JEL Classification: D6, H3, J1, J2, J3, J4, L6, L5, P1

Suggested Citation

McFayden, Elgie, The North American Free Trade Agreement: Impact on U.S. Local Economies and Employment Opportunities (3/20/08). Available at SSRN: https://ssrn.com/abstract=1102975

Elgie McFayden (Contact Author)

Kentucky State University ( email )

400 East Main Street
Frankfort, KY 40601
United States
502-597-6665 (Phone)
502-597-5931 (Fax)

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