Another study conducted by researchers in Canada and Mexico on NAFTA showed that workers were injured in the three countries, but for different reasons (False et al. 2001). In Mexico, real wages have fallen sharply and the number of people in regular paid jobs has fallen sharply. Many workers have been transferred to the “informal sector,” often unpaid work in the family retail trade or in restaurants. In addition, a flood of subsidized and cheap maize from the United States has decimated farmers and the rural economy. In Canada, a decade of increased competition with the United States is undermining social investment in public spending on education, health care, compensation for the unemployed and a wide range of other public services. However, it is difficult to say whether NAFTA is directly responsible for this decline. The automotive industry is generally considered to be one of the most affected by the agreement. However, although the U.S. auto market was immediately open to Mexican competition, employment in this sector increased for years after nafta was launched, peaking at nearly 1.3 million in October 2000. That`s when jobs started to soar and losses became steeper with the financial crisis.
At its lowest in June 2009, the U.S. auto industry employed only 623,000 people. While this figure has since risen to 948,000, it remains 27% below its pre-NAFTA level. Globalization has put pressure on the wages of less educated workers for three main reasons. First, the steady growth of U.S. trade deficits over the past two decades has eliminated millions of manufacturing and employment opportunities in that country. Most displaced people find work in other sectors where wages are much lower, resulting in lower average wages for all American workers. Recent surveys have shown that while displaced workers can find new jobs in the United States, they face a decline in wages, with incomes falling by an average of more than 13% (Mishel et al. 2001, 24).
The new jobs of these evicted workers are expected to be in the service sector, where 98% of net new jobs were created in the United States between 1989 and 2000, and in a sector where average earnings are only 81% of the manufacturing average (Mishel et al. 2003, 177). This competition also extends to export sectors, where pressure to bring down commodity prices is often strong. The idea of a trade agreement actually goes back to the administration of Ronald Reagan. During his tenure as president, Reagan made an election campaign promise to open up trade in North America by signing the Trade and Tariff Act in 1984, which gave the president more negotiations on trade deals without problems. Four years later, Reagan and the Canadian Prime Minister signed the Canada-Americans. Free trade agreement. NAFTA came into force in 1994 under the Clinton administration. The goal of the agreement was to stimulate trade within North America between Canada, the United States and Mexico. It also aimed to remove barriers to trade between the three parties, as well as to most taxes and tariffs on goods imported and exported by each.
Proponents of new NAFTA-based trade agreements, such as the U.S. Free Trade Agreement (FTA), have often argued that these agreements create jobs and increase incomes in the United States. When the Senate recently approved President Bush`s request to speed up trade negotiations1 for a free trade agreement, Bush called the passage of the bill a “historic moment” that would create more jobs and increase sales of U.S. products abroad. Two weeks later, at his economic forum in Texas, the president argued, “(i) t it`s important that we move aggressively [to negotiate new trade pacts], because trade is jobs. More trade means more income for American workers. �