Which Statement Describes The Economic Impact Of This Trade Agreement

Such trade benefits often come under interest, because while costs are highly concentrated in certain sectors such as the automotive industry, the benefits of an agreement such as NAFTA are widespread in society. PROPONENTs of NAFTA estimate that about 14 million U.S. jobs depend on trade with Canada or Mexico, and that the nearly two hundred thousand export-related jobs created each year by the pact cost an average of 15-20% more than lost jobs. However, they also recognized a role of regional integration that would allow members of a trading bloc to remove barriers to trade between them while maintaining a discriminatory right on non-member imports. [18] Therefore, Article XXIV of the GATT provides a substantial exception to the MFN principle, which allows countries to form unions or free trade zones that may discriminate against non-members of the bloc. [19] In a customs union, members remove trade barriers among themselves, but establish a common tariff on imports of non-members. Members of a free trade area also remove trade barriers between themselves, but each maintain their own timetable of tariffs on non-member imports. In addition, some products do not use the same production factors over their life cycle. [6] For example, when computers were first introduced, they were incredibly capital-intensive and needed a highly skilled workforce. Over time, as the volume increased, costs decreased and computers were mass-produced.

In the beginning, the United States had a comparative advantage in production; but today, while computers are mass-produced by relatively unskilled labour, the comparative advantage has shifted to countries where labour is plentiful and cheap. And other products can use different production factors in different countries. For example, cotton production is very mechanized in the United States, but it is very laborious in Africa. The fact that the factors of production may change does not negate the comparative advantage theory; it simply means that the package of products that a nation can produce relatively effectively can change only its trading partners. Much of the debate among political experts has focused on how to mitigate the negative effects of agreements such as NAFTA, including whether workers who lose their jobs are compensated or whether they are offering retraining programs to help them move into new sectors. Experts say programs such as U.S. Trade Adjustment Assistance (AAT), which helps workers pay for education or training to find new jobs, could help rebuke anger over trade liberalization.