Steel Tubing Tariffs Prove that NAFTA Still Needs Work

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Article source: http://www.businessclique.com/. Used with author's permission.

The North American Trade Agreement (NAFTA) was implemented on January 1, 1994. An extension of the previous Canada-U.S. Free Trade Agreement of 1989, NAFTA is the second largest free trade area in the world. The agreement intends to limit restrictions on trade in many industries and phase out tariffs in a period of 14 years. While NAFTA has created greater trade in North America, there still are concerns on how well the trade agreement is accomplishing its goal of deregulation. These concerns gained some validity with the recent issuance of tariffs in the steel tubing market in Mexico.

After a careful investigation, Mexico's Economy of Ministry came to the conclusion that the United States was dumping their steel tubing products into their country. The term "dumping" is used to denote any product that is sold to another country for a lower price than in its home market. By many, dumping is believed to be unfair competition. With the 469% increase in U.S. steel tubing imports from 1999 and 2001(reported by Mexico's Economy of Ministry) it appears that there was some definite foul play occurring in the industry. Mexico's Economy of Ministry felt that tariffs were needed on U.S. steel tubing in order to stop the effects of dumping and to help the economy in Mexico.

On May 27, 2005 Mexico issued tariffs that will raise prices of U.S. tubing anywhere from 7 percent to 25 percent in hopes of leveling out the playing field in the steel industry. A statement made by the Ministry declared that "imports from the United States take place under conditions of price discrimination and harm national production of similar products." This event has proven that NAFTA has not cured all our problems with trade and is still struggling in deregulation. In result of trying to save jobs in the steel industry, both countries have brought us farther away from free trade. Dumping and tariffs are both activities that will keep the countries away from free trade.

The greatest controversy is that trade has not really become more fair at all with NAFTA but has even possibly become more unfair. For instance, it is being argued that while trying to stimulate and protect trade in North America, NAFTA is inhibiting trade with other countries such as China. Another problem is it looks as if growth is occurring only in the northern states of Mexico with little effect in the southern states. The trade agreement has been blamed for the increased concentration of wealth in the United States and Mexico in the last ten years. While Mexico's overall economy has picked up since NAFTA, it appears that the richer are getting richer while the poor are getting poorer. The workers in Mexico have experienced a 20% decrease in pay since the implementation of NAFTA. It seems that NAFTA is helping out corporations without helping the people.

As seen from the recent steel tubing example, NAFTA still has a lot of room for improvement. We need to be aware of the term "free trade" and know that this means that products cannot be dumped to other countries like steel tubing to Mexico. Because of this dumping, the country has to compensate with tariffs and this brings us even farther away from free trade. While the intention of NAFTA to stimulate the North American economy is a good cause, it has to be done in the right way. We cannot sacrifice the people's well being for the sake of the economy. Revisions to NAFTA need to be created to ensure that free trade will exist between the countries.

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