Answer to Question 1
Assessing NAFTA's consequences nearly two decades after it came into force on January 1, 1994, is tricky because it is hard to disentangle the effects of the free trade agreement from other factors that shape social and economic outcomes. Notably in Mexico, NAFTA's implementation was quickly followed by a massive financial crisis in 1994 and 1995, which may or may not have been linked to the agreement. Everyone agrees that NAFTA produced a significant increase in cross-border trade and financial flows, and its defenders, including many business groups, think tanks, and politicians, claim that this contributed to economic growth. Critics of NAFTA, however, insist its positive benefits have been largely limited to already economically advantaged groups, and they blame it for contributing to elevated levels of income inequality and stagnating wages and living standards for workers and other non-elite groups. Even some one-time supporters of NAFTA have concluded that it has failed to provide the boost to living standards they had expected while exacerbating a wide array of socioeconomic problems. Economist Robert Scott, for instance, has found that the subsequent explosion in the United States' trade deficit with Mexico engendered a net loss of over 680,000 jobs north of the border, with more than 60 percent of such job displacement occurring in the manufacturing sector. Declining industrial employment had particularly harmful consequences for the job prospects of unskilled workers and weakened labor's bargaining position with employers; thus, NAFTA fed escalating pay and income disparities as well as a growing gap between median wage levels and productivity growth. Meanwhile, the substantial rise in FDI into Mexico resulted in only minimal employment gains while intensifying various forms of inequality. In part, that is because many of the newly created jobs by NAFTA were in the informal sector or did not provide standard benefits (such as paid vacations or social security). Nearly all of the growth in manufacturing employment was due to greater work opportunities in the low-wage and highly exploitative maquiladoras, which are mostly foreign-owned export assembly plants that comprise a significant, and rapidly growing, segment of Mexico's industrial sector. Furthermore, expanded employment in manufacturing was largely outweighed by losses suffered among Mexico's agricultural producers as a result of the influx of cheaper, sometimes heavily subsidized U.S. farm imports. The result was a massive migration out of the Mexican countryside. Improved access to Mexican markets benefited large U.S. agricultural producers but did not prevent the elimination of hundreds of thousands of smaller family farms during the NAFTA era.
Answer to Question 2
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