Which Statement Describes The Economic Impact Of This Trade Agreement

Claims on both sides of the NAFTA debate are exaggerated, experts say in this 2014 report [PDF] from the Peterson Institute for International Economics. In addition, some products do not use the same factors of production throughout their life cycle. [6] For example, when computers were first introduced, they were incredibly capital-intensive and required a highly skilled workforce. Over time, as the volume increased, costs decreased and computers could be produced in series. Initially, the United States had a comparative advantage in production; but today, where computers are mass-produced by a relatively low-skilled workforce, the comparative advantage has shifted to countries where cheap labor is plentiful. And other products can still use different factors of production in different countries. For example, cotton production in the United States is highly mechanized, but in Africa it is very labor-intensive. The fact that factors of production can change does not destroy the theory of comparative advantage; it simply means that the mix of products that a nation can produce relatively more efficiently than its trading partners can change. This view was first popular in 1817 by the economist David Ricardo in his book On the Principles of Political Economy and Taxation. He argued that free trade expands diversity and that prices are available in a country while making better use of its resources, knowledge and specialized skills. Canada experienced strong growth in cross-border investment during the NAFTA era: since 1993, U.S. and Mexican investment in Canada has tripled.

U.S. investment, which accounted for more than half of Canada`s FDI portfolio, increased from $70 billion in 1993 to more than $368 billion in 2013. China has comparable trade surpluses. However, China pegged the renminbi to the dollar, preventing its exchange rate from rising, thus restoring a trade balance. China does this by using the dollars it accumulates from its trade surplus to aggressively buy U.S. currency in the form of Treasuries. The result was an overvalued dollar and an undervalued renminbi. (This is similar to what Japan did in the early 1980s, when the yen was undervalued and the dollar was overvalued.) In economic theory, an “undervalued exchange rate is both an import tax and an export vent, and therefore the most mercantilist policy imaginable.” [32] Much of the debate among policy experts has focused on how to mitigate the negative effects of agreements like NAFTA, including whether to compensate workers who lose their jobs or offer retraining programs to facilitate their transition to new industries. Experts say programs like the U.S. Trade Adjustment Assistance (TAA), which helps workers pay for their education or training to find new jobs, could help quell anger over trade liberalization. Second, the economic data needed is often weak, not only for developing countries, but even for the United States and other developed countries. For example, trade and economic data between and even within countries are not easily compatible.

In the United States, the North American Industry Classification System (NAICS), which is used to collect statistical data to describe the U.S. economy, is based on industries with similar processes for manufacturing goods or services. .