Recently, there has been a large amount of media attention focused on Donald Trump’s hatred of the North American Free Trade Agreement (NAFTA). This animosity has also been targeted at CEO Mark Fields’ to move parts of Ford’s manufacturing to Mexico. Sadly, logic and fact have taken a backseat in both of these discussions. Clichés from Trump dominate the media scene, including a recent quote highlighted on CNN, “NAFTA has destroyed our country.” This statement is far from the truth. No matter what clichés Trump or any other political candidate throw at NAFTA, the American people should not be fooled: NAFTA allows the U.S. to succeed in attracting higher-paying jobs, which is currently the country’s comparative advantage on the international market.
Trump’s main argument is that NAFTA allows for jobs to easily move from the United States to Mexico, thus hurting the U.S. economy. Trump’s proposed solution includes destroying the NAFTA pact and the implementation of a hefty 35% tax on all imported cars. Not only will Trump’s proposed solution harm the U.S. economy, he also has incorrect premises involving NAFTA. NAFTA encourages some manufacturers to leave the U.S., but this does not necessarily hurt our economy, especially if the U.S. is importing other jobs as well as increasing its consumption and investment through the open trade environment that NAFTA creates. Some honest, hard-working Americans will lose their jobs in the short run, but if a system of free trade is protected, the long-run will produce lower unemployment rates and an increase in the well-being of every consumer.
The law of supply and demand applies to the job market just as strongly as it applies to other economic goods. In the Ford case, the company has a demand for low-paying, unskilled labor, which Mexico can supply with ease. Therefore, it makes sense that Mark Fields would move some of his manufacturing plants to Mexico where Ford can make a larger profit and where workers are willing to work for less. This is one comparative advantage that the working class in Mexico has, the ability to work low-skilled jobs at a cheaper rate. Mexico’s lower cost of living allows for this comparative advantage to exist.
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