In 1993 the US, under the Clinton administration, negotiated a trade agreement with Mexico and Canada that eliminated tariffs between the three countries. For years the agreement was hailed as a bipartisan success story, proof that two parties can work together to do something good. Now NAFTA is a campaign issue, not because Hillary is touting her association with it. In fact, Hillary Clinton appears to be less than fond of her husband’s legacy.
So what is so bad about NAFTA? Most of the arguments pinpoint Mexico as the scapegoat.
In my next few posts I will debunk an argument against NAFTA. So let’s start with…
1. According to Senator Clinton NAFTA is “continuing to drive hundreds of thousands, even millions, of people from Mexico into our country…”
Ok, seriously? NAFTA does not promote illegal immigration, it makes it less likely. Lets say there are two cities Abcd and Xyz. In Abcd you can be paid $1 per hour for a clerical job, in Xyz you can be paid $10 per hour for the same thing. Everyone who works in clerical jobs will move to Xyz, so that there is a large supply of clerical workers and the wage in Xyz will decrease while the wage in Abcd will increase. Eventually the wages will even out so that clerical jobs pay $5 per hour in Abcd and in Xyz.
Now let’s say that Abcd and Xyz are in different countries, and you can’t move between the two without permission. People from Abcd will still want to move to Xyz in order to take advantage of the higher wages, but they will only move if the new wage minus the cost of moving is greater than the wage they are getting.
NAFTA allows for the growth of industry in Mexico, which will increase demand for labor and increase wages. That means that there is less incentive for Mexicans to immigrate illegally.
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