1. Chapter 1 The Global Marketplace

2. ROAD MAP: Previewing the Concepts
Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions.
Describe three key approaches to entering international markets.
Explain how companies adapt their marketing mixes for international markets.
Identify the three major forms of international marketing organization.

3. Global Marketing in the 21st Century
The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows.
International trade is booming and accounts for 25% of U.S. GDP.
Global competition is intensifying.
Higher risks with globalization.

4. U.S. Globalization
Many U.S. companies have made the world their market.

5. Major International Marketing Decisions

6. Looking at the Global Marketing Environment
The International Trade System:
Restrictions—tariffs, quotas, embargos, exchange controls, and non-tariff trade barriers.
The World Trade Organization and GATT:
Helps Trade—reduces tariffs and other international trade barriers.
Regional Free Trade Zones:
Groups of nations organized to work toward common goals in the regulation of international trade.

7. Chapter 1
Discussion Question
What types of U.S. companies would like to see higher tariffs and what types would like to see lower tariffs or no tariffs? Why is this the case?

8. Industrial Structure Income Distribution
Shapes a country’s product and service needs, income levels, and employment levels.
Subsistence Economies
Raw Material Exporting Economies
Industrializing Economies
Industrial Economies
Income Distribution

9. Political-Legal Environment
Attitudes Toward International Buying
Government Bureaucracy
Political Stability
Monetary Regulations

10. Cultural Environment
Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program.
Business norms vary from country to country.
Companies that understand cultural nuances can use them to advantage when positioning products internationally.

11. Cultural Differences
When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution.

12. Deciding Whether to Go Global
Reasons to consider going global:
Foreign attacks on domestic markets
Foreign markets with higher profit opportunities
Stagnant or shrinking domestic markets
Need larger customer base to achieve economies of scale
Reduce dependency on single market
Follow customers who are expanding

13. Deciding Which Markets to Enter
Before going abroad, the company should try to define its international marketing objectives and policies.
What Volume of Foreign Sales is Desired?
How Many Countries to Market In?
What Types of Countries to Enter?
Choose Possible Countries and Rank Based on Market Size, Market Growth, Cost of Doing Business, Competitive Advantage, and Risk Level

14. Colgate Goes to China
Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decade.

15. Market Entry Strategies

16. Market Entry Strategies
Exporting:
Indirect: working through independent international marketing intermediaries.
Direct: company handles its own exports.

17. Market Entry Strategies
Joint Venturing:
Joining with foreign companies to produce or market products or services.
Approaches:
Licensing
Contract manufacturing
Management contracting
Joint ownership

18. Joint Ownership
KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi.

19. Market Entry Strategies
Direct Investment:
The development of foreign-based assembly or manufacturing facilities.
This approach has both advantages and disadvantages.

20. Deciding on the Global Marketing Program
Standardized Marketing Mix:
Selling largely the same products and using the same marketing approaches worldwide.
Adapted Marketing Mix:
Producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.

21. Marketing Mix Adaptation
In India, McDonald’s serves chicken, fish, and vegetable burgers, and the Maharaja Mac—two all-mutton patties, special sauce, lettuce, cheese, pickles, onions, on a sesame-seed bun.

22. Five Global Product and Promotion Strategies

23. Global Product Strategies
Straight Product Extension:
Marketing a product in a foreign market without any change.
Product Adaptation:
Adapting a product to meet local conditions or wants in foreign markets.
Product Invention:
Creating new products or services for foreign markets.

24. Global Promotion Strategies
Can use a standardized theme globally, but may have to make adjustments for language or cultural differences.
Communication Adaptation:
Fully adapting an advertising message for local markets.
Changes may have to be made due to media availability.

25. Global Pricing Strategies
Companies face many problems in setting their international prices.
Possible approaches include:
Charge a uniform price all around the world.
Charge what consumers in each country will pay.
Use a standard markup of costs everywhere.
International prices tend to be higher than domestic prices because of price escalation.
Companies may become guilty of dumping –a foreign subsidiary charges less than its costs or less than it charges in its home market.

26. International Pricing
Twelve European Union countries have adopted the euro as a common currency, creating “pricing transparency” and forcing companies to harmonize their prices throughout Europe.

27. Whole-Channel Concept for International Marketing

28. Deciding on the Global Marketing Organization
Organize an export department
Create international divisions
Geographical organizations
World product groups
International subsidiaries
Become a global organization

29. Rest Stop: Reviewing the Concepts
Chapter 1
Rest Stop: Reviewing the Concepts
Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions.
Describe three key approaches to entering international markets.
Explain how companies adapt their marketing mixes for international markets.
Identify the three major forms of international marketing organization.

30. The North American Free Trade Agreement Katy Haas
Coordinator, Alianzas
Although NAFTA is between Canada, U.S. and Mexico, this presentation will focus specifically on trade between U.S. and Mexico.
The purpose is to present a nonbiased look at NAFTA, although both views will be examined.

31. Index Why Enter a Free Trade Agreement? What is NAFTA?
Background of NAFTA
Reaction after Implementation
The Mexican Peso Crisis
What about America’s Farmers?

32. --President George W. Bush
Impact on:
Employment
Immigration
Environment
Trucking industry
Missouri’s role
NAFTA’s future
Conclusion
“Mexico is the most important country to the United States in the 21st century”
--President George W. Bush
Sept. 5, 2001

33. Why Enter a Free Trade Agreement?
(Interview with Cecilia Rios )
COMPARATIVE ADVANTAGE: Countries do not have trade at the intersecting point on this graph because each is producing less than if they had a “comparative advantage” - producing a good or service at the lowest cost.
IN THIS SIMPLIFIED ECONOMY: The new line shows the number of goods and/or services that can be produced if the two countries specialize in those goods and/or services that they have comparative advantage --- consumers can have more of two goods at a cheap price.
(Interview with Bronwen Madden )
OVERALL
Eliminates tariffs.
Everyone benefits because goods are at a lower cost.
The most underdeveloped country/partner gains the most - we help them develop.
Economic liberalization:
Effects: Privatization, less governmental control; Increased competitiveness; Higher specialization resulting in a shifting of Sectors (example: Corn in Mexico); Lower costs to consumers
Believes in freedom from governmental controls and the role of the state in protecting those rights. Believes that natural market forces should determine economic activity.
WHY ARE BARRIERS TO TRADE GOOD AND/OR BAD?
Good: Protect infant industries and help countries grow; give more money to the government - country may be less developed and in strong need of financing
Bad: Inefficient; consumers pay more, producers paid less; quality may be lowered as there is less competition
FOR EXAMPLE: Prior to NAFTA, Mexican tariffs, which ranged from 0 to 25 percent, were times U.S. tariff rates – and about the same as (pre-CFTA) Canadian rates. Without NAFTA, international trade rules would have permitted Mexico to raise its tariffs as high as 50 percent without paying compensation. Under the NAFTA, however, tariffs on all goods entering Mexico from the United States will be eliminated (App. E, 215).

34. Levels of Economic Integration
(Interview with Bronwen Madden )
An FTA is the first level of economic integration
Heading for a union - one day there will be free movement of labor, same monetary unit. For example, every industry has a code (NAICS code). Yellow Global already sees Canada and Mexico as domestic.
The North American Industry Classification System (NAICS) has replaced the U.S. Standard Industrial Classification (SIC) system. It will reshape the way we view our changing economy. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.
CODE USED BY ALL COUNTRIES IN NORTH AMERICA TO ACCOUNT FOR BUSINESS ACTIVITY
*If the policies are not just harmonized by separate governments, but have a unified government with binding commitments on all members, then you reach political integration and have “full economic integration”.

35. Effective as of January 1, 1994
What is NAFTA?
Effective as of January 1, 1994
A trade agreement between CANADA, MEXICO, and the UNITED STATES which provides for the elimination of tariffs on North American goods shipped among the three countries.
(Supply Chain Directions for a New North America, Prepared by Andersen Consulting and University of North Florida for the Council of Logistics Management, 1995, Oak Brook, IL.)
WHEN: Although signed in November 1993, the North American Free Trade Agreement (NAFTA) became effective on January 1, 1994.
WHAT: It is a tri-lateral agreement between Canada, Mexico, and the United States which provides for the elimination of tariffs on North American goods shipped among the three countries (App. F, 223).
INDUSTRIES AFFECTED:
Major industries specifically addressed by NAFTA include agriculture, automotive, chemical and petroleum, consumer goods, electronics, industrial machinery, insurance and banking, pharmaceuticals, retailing, steel, telecommunications, textiles and apparel, and transportation (Appendix F, 223).
( 6/25/02)
MISPERCEPTIONS that grew out of the treaty’s implementation:All items that qualify would immediately receive duty-free status. However, while some tariff reductions became effective on January 1st, others are to be phased in over a 15-year period - with full implementation not coming until 2008.

36. Background of NAFTA An Introduction Salinas Clinton Zedillo Marcos
LAND PRIVATIZED (Interview with Bronwen Madden )
When NAFTA was implemented, the land was privatized and there was a displacement of landowners, who saw it as the Northern part of Mexico leaving them behind.
( )
CARLOS SALINAS - President
Fraudulent election that determined Miguel de la Madrid's successor. On July 6, 1988, when the first results began to arrive, a computer glitch was created - one long enough to manipulate results in favor of the government candidate, Salinas, who was ultimately declared the winner.
The Revolution supported the ejido system of agricultural cooperatives. Because the ejidos were at the center of the land reform program, to attack them was “sacreligious”. But now Salinas did exactly that. He declared in a 1992 speech, that “land distribution is unproductive and impoverishing."
Privatization was also a leading priority in the new president's program. State control was out and by early 1992, 85 percent of companies formerly owned by the government had been sold to the private sector. Because of this, by 1993 inflation had been lowered to 10% and the foreign debt reduced by some $25 billion. This set the stage what Salinas truly wanted: inclusion of Mexico into the North American Free Trade Agreement (NAFTA).
THOUGHTS BEFORE IMPLEMENTATION IN MEXICO It was believed that NAFTA would dramatically hurt Mexico's lower-middle class, wiping out Mom and Pop establishments all over the country as the Wal-Marts, McDonalds and Kentucky Fried Chickens proliferated. Others countered that NAFTA would result in more well-paying jobs for Mexicans.
Within a week of the U.S. Congress approving NAFTA, Salinas revealed his choice to succeed him as president in 1994: LUIS DONALDO COLOSIO, who publicly distanced himself from the Salinas government and the PRI (shot to death, March Also, Salinas’ older brother allegedly killed his former brother-in-law/PRI secretary general - due to a bitter divorce. Salinas now in political exile in Ireland). Replaced by ERNESTO ZEDILLO.
( )
President Salinas remarked after the NAFTA vote: "For the first time ever, Mexico has a deadline for becoming more efficient. There is no more mañana."
Salinas
Clinton
Zedillo
Marcos

37. Expectations and Goals
MEXICO: Lower inflation and foreign debt; create more well-paying jobs for Mexicans, thus producing less incentive for Mexicans to work illegally in the U.S.; Mexico would become a richer market for American exporters.
UNITED STATES: Would solidify an expanding trade relationship, which would spur job creation at home and help to continue the revolutionary shift throughout Latin America away from state controlled markets toward freer markets.
( 5/13/02)
The following is a listing of goals as set forth in NAFTA’s preamble:
· To strengthen bonds of friendship and cooperation
To act as a catalyst to international cooperation
· To create, expand, and secure future markets
· To establish fair rules of trade
· To ensure a predictable framework for business planning
· To enhance firms competitiveness in foreign markets
· To foster creativity and innovation
· To create new employment opportunities
· To promote development
To strengthen environmental regulations
Would exert presidential authority, improve inter-American relations and advance the cause of global trade liberalization.

38. Reaction After Implementation
( )
In 1998, Mexico replaced Japan (which has an economy 11 times its size) as the No. 2 trading partner with America. In less than 10 years it will be número uno, replacing Canada.
However, 40% of its population lives on less than $2 a day.
QUESTIONS AFTER ITS IMPLEMENTATION (at turn of millennium)
Will dialogue continue in Chiapas or will the government work to exterminate the Zapatistas? The Zapatista uprising remains unresolved.
Does PAN have a chance in 2000 to unseat the PRI, which will have been in power over 70 years or will PRI again rig the election? Vicent Fox took office in December created a multiparty system [shift from the Institutional Revolutionary Party (PRI) to the National Action Party (PAN)]
(Interview with Bronwen Madden )
Fox is different than other presidents because he employed people from the private sector and kept people from the previous sector, too. People might think negatively of him because there are so many expectations that he can’t live up to.
Will street crime, assaults on tourists, and the power of drug kingpins, be brought under control? Corruption and violence have gone from bad to worse. And Mexico's multi-billion- dollar narco-trade with its addicted neighbor to the north is a powerful destabilizing force.
( 6/25/02)
SEPTEMBER 11, 2001
MEXICO PRIOR TO 9/11
Fox met with President Bush on Sept. 4th and proposed a very broad agenda: legalizing anywhere from 3 to 7 million illegal immigrants, expanding temporary migration from Mexico, increasing cooperation in law enforcement, especially against drug trafficking, and organizing a binational committee to promote development in the poorer regions in Mexico.
MEXICO AFTER 9/11
A week prior to 9/11, the discussion focused on ways to facilitate integration and the movement of people and of goods. On 9/11, the borders were virtually shut down. In the immediate term, 9/11 has had a profound effect on both Mexico and Canada. Both countries had come to rely on freer trade with the United States, with U.S. exports and imports approximately 85% of their total trade, and thus any impediments introduced at the borders had a very deleterious effect on the two coutries’ economies.
How the Countries Were Affected Immediately
How They Are
Affected Now

39. Top U.S. Exports Imports and 1. Motor Vehicles 2. Oil/Natural Gas
3. Motor Vehicle Parts
4. Semiconductors
5. Electronic Parts
1. Aircraft
2. Electronic Computing Equipment
3. Motor Vehicle Parts
4. Motor Vehicles
5. Semiconductors
6. Aircraft/Space/Missile Parts
7. Chemicals
8. Plastics
9. Airplane Engines/Parts
10. Refined Petroleum Products
We must go back to the point of comparative advantage as outlined above. Nobody on either side will deny that Mexican labor is much cheaper and cost-effective than equivalent American labor. The fact is that America is moving away from a heavy manufacturing base, and this just shows the trend. Yes, jobs are being lost in this country, but goods are also being produced, and thus sold, at cheaper prices because of the cheaper price of labor (70% of a companies' expenses). However, more importantly, the higher-skilled manufacturing jobs and services industry has been growing.
U.S. imports are very labor intensive because it is cheaper to import from a country with lower wages than producing it internally. And since Canada is our greatest trading partner and Mexico is our third, these import statistics are greatly affected by their activity.
U.S. exports are more technologically based and require a better educated population to produce - a fact that gives the U.S. a comparative advantage for these types of industries. [Source: 1994 Census Information]

40. NAFTA Pros Goods/Services at lower cost
Most underdeveloped countries gain the most (i.e. standards of trade increased)
Tariffs reduced
Jobs created
Mexico’s economy is growing again
Goods at lower cost, the most underdeveloped countries gain the most (increase standards of trade, etc.), reduces tariffs
( 5/14/02)
U.S.-Mexico trade has gone up, jobs were created and Mexico’s economy is growing again. While gains in U.S. exports to Mexico have lagged, the delays are temporary and caused by economic conditions beyond NAFTA’s control.
Overall U.S.-Mexico trade has increased over the last two decades. From 1993 to 1996, annual bilateral trade grew $46.6 billion. U.S. shipments to Mexico are dominated by intermediate goods used to make finished products, heavy machinery and tools, and chemicals. Mexico's shipments to the United States are dominated by petrochemicals, steel, apparel and farm produce. Historically that growth has been uneven due to recurring periods of instability in the Mexican economy. While Mexican exports to the U.S. have shown strong performance, U.S. exports to Mexico have been highly vulnerable in periods of Mexican economic crisis (1976, 1982, 1986, 1994) which has resulted in cyclical U.S. trade deficits.
( 5/13/02)
The need to strengthen financial and economical ties with Mexico becomes more important when considering that Mexico is one of the top 10 Big Expanding Markets: Chinese Economic Area (CEA: China, Hong Kong, Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, Association of Southeastern Asian Nations (ASEAN: Indonesia, Brunei, Malaysia, Singapore, Thailand, Phillippines, Vietnam)

41. NAFTA Cons Fuel for peso crisis Benefits Mexico more than the U.S.
U.S. deficit with trading partners
Loss of low-wage American jobs to Mexico
Environmental problems
Traffic congestion and delays along the borders
( 5/14/02)
FUEL FOR PESO CRISIS Critics blame NAFTA for much of the crisis, saying that euphoria over the pact led to bad lending decisions by Mexican banks and unsustainable consumer spending. Furthermore, they say, concern about NAFTA’s approval caused President Ernesto Zedillo’s administration to delay the devaluation, which would have been less severe if implemented earlier.
BENEFITS MEXICO MORE THAN THE U.S. It has also been argued that the way NAFTA was written benefits Canada and Mexico more than the United States. For example, Canada and especially Mexico have a longer time to change their tariffs and restrictions than the U.S. does. Plus, the mandatory restriction for the purchase of only American-made goods by certain U.S. Government agencies has been abolished in order to provide an atmosphere of competition from both Mexico and Canada in this market.
U.S. DEFICIT WITH TRADING PARTNERS One problem frequently brought up is that of the American deficit with it's trading partners. In fact, the U.S. has its 4th highest deficit with Canada ($1.4 billion for July 1995, $18.10 billion for fiscal year 1994) and 5th highest with Mexico ($1.2 billion for July 1995, $8.21 billion for fiscal year 1994).
LOSS OF LOW-WAGE AMERICAN JOBS TO MEXICO The biggest complaint about NAFTA is how jobs, mainly blue-collar jobs, will all be lost to Mexico because labor is so cheap down there. This above statement is at least half true. What is true is that Mexican labor is cheaper than American labor. The average U.S. worker makes $10.97/hour while the average Mexican worker makes $1.85/hour. And in the FTZ (Free Trade Zone) in Northern Mexico, the worker makes $0.75/hour.
United We Stand reports of many prominent companies that are laying off U.S. workers in favor of cheaper labor elsewhere, a direct cause of NAFTA they say. An example (non- inclusive) of some of these companies are: Scott Paper, Volkswagen, Sansung, Continental Apparel Manufacturing Co., Leviton, Matsushita (Panasonic), Chrysler, and Sara Lee. In fact, the greatest Mexican employer right now is General Motors (GM). And the greatest U.S. employer right now is that of temporary labor, which includes the migrant workers from Mexico.

42. The Mexican Peso Crisis
Was NAFTA to Blame?
Wages in United States and Mexico
TRADE AFTER THE PESO DEVALUATION A U.S. surplus of $1.6 billion in 1994 eroded to a $260 million deficit in The price of Mexican products suddenly became cheaper for U.S. residents to buy, while U.S. products became more expensive for Mexico residents. The impact was greater felt in Mexico, where the resulting recession caused a decline in Mexican consumer income. That in turn worsened the prospects for U.S. exports. U.S. exports to Mexico declined by 11%.
Also, the trade deficit with Mexico is not of extreme importance when looked at in the entire scheme of things. It is only 1/10 of 1% of the U.S.'s annual GDP, and with the falling peso, we are taking advantage by being able to buy Mexican products cheaper than before. The peso's value has dropped % from Mar Sep. 95.
Dec. 1994: 1 US dollar = 3.5 Mexican pesos
Sept. 1995: 1 US dollar = 6.3 Mexican pesos
Dec. 1995: 1 US dollar = 7.68 Mexican pesos
As of April 12, 2003: 1 US dollar = 10.7 Mexican pesos. (
(Interview with Bronwen Madden )
Since NAFTA, the economy drastically improved.
The peso devaluation during NAFTA’s infancy in late 1994 plunged Mexico into a severe recession and sharply altered trade flows.
NAFTA NOT TO BLAME While NAFTA critics blame NAFTA for Mexico’s economic crisis, other observers say the interplay of complex financial, economic and political factors in forced the devaluation and triggered the recession. Rather than letting Mexico default on its debts, the Clinton administration scrambled to help with a $50-billion credit package - $20 billion from the United States and the balance from the World Bank and the International Monetary Fund.
In fact, NAFTA was a cushioning and stabilizing factor during Mexico’s economic crisis. USDA analysts say the 22% drop in U.S. exports to Mexico could have been worse without NAFTA, because the agreement kept Mexico from installing new barriers to stem imports. In addition, NAFTA gave the United States and Canada an advantage over other agricultural traders in the Mexican market in 1995, and U.S. market share in Mexico increased even as its exports to Mexico declined.

43. What about America’s Farmers?
( )
In particular, America’s farmers have benefited greatly from NAFTA, because it’s meant more export opportunities. Since NAFTA was approved in 1993, United States agricultural exports to Mexico have nearly doubled. Mexico now imports $6.5 billion of United States agricultural products making it our third largest agricultural market. United States exports of agricultural products to Canada since implementation of NAFTA have increased 44 percent. Canada is the second largest market for United States agricultural exports, with Canadians purchasing $7.6 billion worth of American products last year. Canada and Mexico purchased over 25 percent of the United States agricultural product exported in American farmers can’t afford to lose access to the NAFTA markets.
( )
American farmers are taking a loss and there's no easy solution. And one way or another, it's going to hit the American consumer in the pocketbook Freedom to Farm Act -- a bill that was supposed to get farmers out from under the thumb of government subsidies When it was passed three years ago, the Freedom to Farm Act was hailed by many as a way of freeing farmers from a government yoke that offered subsidies but dictated what they could plant. The new legislation would allow farmers to gauge the free market and react to it when they made their decisions about what to plant. It's getting harder and harder each year for our producers to make profits and stay in business. This is how Norwood sees the options: Go back to government-subsidized, government-regulated farming. Or allow corporate farms to take over the job -- with no guarantee they'll actually produce in the United States and no way to control costs in the grocery store. Or allow the market free rein and go out of the farming business in the United States. The American consumer who wants to have cake and eat it, too, may have to make a hard decision: Tax dollars out of his pocket to subsidize farms or money out of his pocket at the grocery store. Part of the problem, farmers say, is that they're facing a market that's free, but not necessarily fair. They're hobbled by regulations that increase the costs of production and foreign competitors with cheap labor and cheap production. Foreign farms use pesticides that U.S. growers aren't allowed to use, then manage to sell their goods to the United States for cheaper prices than domestic goods bring. American farmers want the same restrictions placed on foreign growers who import foods to the United States. And they want better enforcement at the borders. And all of that translates to higher prices. The alternative is to keep sending billions of dollars in emergency aid to farms that are desperately trying to stay afloat. Subsidies that have been shaved under the Freedom to Farm Act have only been replaced with disaster aid. Congress passed $6 billion in disaster relief last year after drought conditions burned up crops in the fields. They're likely to pass another emergency aid bill this fall. Overhauling the crop-insurance program -- a project that got a boost in the wake of last year's farm disaster -- will prevent fluctuations because of the weather. But it won't do anything about low commodities prices. And that's where the hard choices come in. There are laws against dumping below-cost-of-production imports in this country. But you'll let me sell below cost of production all the time.
Farmers in Missouri also benefited from exports of agricultural products to Canada, which totaled $4.0 million in 1999.
BENEFITS: More export opportunities. Since NAFTA was approved in 1993, U.S. agricultural exports to Mexico have nearly doubled.
DISADVANTAGES: Face regulations that increase the costs of production while foreign competitors gain from cheap production and labor.

44. Impact on: Employment Was U.S. workers’ loss Mexican workers’ gain?
Maquiladora - Primarily foreign-owned assembly plants
Jobs lost to Mexico vs. Jobs supported by exports to Mexico and Canada
MAQUILADORAS Primarily foreign-owned assembly plants. While production jobs did move to Mexico, they primarily moved to maquiladora areas just across the border. These export platforms—in which wages, benefits, and workers’ rights are deliberately suppressed—are isolated from the rest of the Mexican economy. They do not contribute much to the development of Mexican industry or its internal markets, which was the premise upon which NAFTA was sold to the Mexican people. It is therefore no surprise that compensation and working conditions for most Mexican workers have deteriorated. The share of stable, full-time jobs has shrunk, while the vast majority of new entrants to the labor market must survive in the insecure, poor-paying world of Mexico’s “informal” sector.
They are allowed to import into Mexico duty-free components and raw materials that are then used to make export goods. If the goods are exported back to the United States, the U.S. content of the goods is also exempt from U.S. tariffs. Critics still say that maquiladoras take away U.S. jobs, but a National Bureau of Economic Research study in April 1996 found that they help spur jobs on both sides of the border.
(Interview with Bronwen Madden )
Maquiladoras have high turnover rates. Competition between companies, therefore no workforce development. People would go to make money and then leave; they don’t want to stay. Want to go to the U.S. for higher pay, but underestimate the cost of living.
FREE TRADE OF WORKERS?
Temporary Entry for Business Persons:
Expanded trade and the economic alliances developed with Mexican business as a result of the NAFTA will result in more business persons traveling to Mexico. The U.S. and Mexican governments have developed uniform and transparent procedures to facilitate temporary entry of business persons who conduct trade in goods and services as well as investment activities. U.S.-Canada provisions are essentially unchanged from CFTA (App. E, 220).
NAFTA does not remove or weaken U.S. licensing and certification requirements, but consistent with the NAFTA principle of nondiscrimination, licensing of professionals, such as lawyers, doctors, and accountants, should be based on objective criteria aimed at ensuring requirements for licensing of professionals will be eliminated within two years.

45. Impact on: Immigration
In the 1990s, U.S. population grew 13.2%, with 60% growth of Mexican immigrants.
Among Latinos nationwide, 26% are between the ages of
Remittances from Mexicans working in the U.S.: $6.65 billion (for 2001 through 3rd quarter)
Increase in Mexican migrants led to increase in Border Patrol staff
(“Mexico Today” Todd Nelson, 12/5/01. State of Missouri, Dept. of Econ. Development, Mexico Trade Office, Associate Director)
Remittances from Mexicans working in the U.S.:
$6.65 billion (for 2001 through 3rd quarter)
39.6% increase over last year
equivalent of 6 million min. wage jobs
That money - the nation's third largest source of income, behind oil and tourism - has not only provided relatives money for food, clothing and medicine.
( 6/25/02)
In the 1990s, the population of the U.S. grew 13.2%, with 60% growth of Mexican immigrants.
NATION Hispanics have surpassed African Americans as the United States’ largest minority group, with the Latino population expanding almost four times faster than the general U.S. population million residents were counted in the United States of which 35.3 million (or 12.5%) were Hispanic. Mexicans represented 7.3%.
MISSOURI From 1990 to 2000, Missouri’s Latino population increased by 92.2%. 40% of this population lives in the West Central region, with 30% living in Jackson County.
40 percent of Missouri’s Latino population lives in the West Central region, with 30 percent living in Jackson County.
El Centro:
55% of the respondents (Johnson and Wyandotte counties) are female and 45% are male. As in 2001, the Latino immigrants surveyed are younger than the overall Kansas City population. 59% of respondents are between the ages of Because these individuals are in the prime of both working and child-bearing years, this age breakdown has important implications for labor participation rates and future population growth in Kansas City. Among Latinos nationwide, 26% are between the ages of

46. Impact on: Environment
NAFTA Environmental Agreements:
( 5/14/02)
On the environmental front, NAFTA has done virtually nothing. Two agreements were added to the final NAFTA negotiations in response to several U.S. environmental groups' concerns about cross-border pollution. 1). One was the North American Agreement on Environmental Cooperation (NAAEC), which created a commission to enforce environmental law. But the commission was not fully staffed until 1995 and has had a slow start. 2). The other agreement created the Border Environment Cooperation Commission and the North American Development Bank to address pollution problems along the U.S.- Mexican border. By mid-1996, the development bank had an $80-million budget and was considering loans to border communities for eight projects designed to reduce water pollution. Mexico has closed down 72 maquiladoras and suspended operations of others for environmental problems, he said.
( )
The Commission for Environmental Cooperation (CEC), created by the NAAEC, has programs that foster the development of regional information, enhanced technical expertise, and policies that allow it to implement trilateral cooperative programs. The CEC has addressed issues related to trade in sustainable agricultural products, such as shade grown coffee; the banning of dangerous chemicals, such as DDT, in North America; development of environmental management system guidelines for businesses; and a strategy to conserve wildlife and natural ecosystems in North America.
( )
Since NAFTA has been in place, Mexico has begun a serious effort to enforce its environmental laws for new companies, thereby diminishing any incentive for firms to relocate to Mexico to avoid environmental enforcement.
( )
The CEC released a study (March 2001) on the environmental impacts of cross-border trade and transportation within NAFTA
Currently, NAFTA trade contributes significantly to air pollution in all the corridors. Truck idling associated with border crossing delay contributes significantly to CO emissions, particularly in corridors where border delay is problematic. As much as 6% of all trade-related CO emissions in the corridors are caused by truck idling.
North American Agreement on Environmental Cooperation (NAAEC) - commission to enforce environmental law.
Border Environment Cooperation Commission and the North American Development Bank - commission to address pollution problems along the U.S.-Mexican border

47. Trucking Industry
The areas of concern include: vehicle safety, driver training, environmental issues and possible illegal drug trafficking.
(Hispanic Link Weekly News 5/6/02)
“Teamsters File Suit in New Maneuver to Block Mexican Truckers from Driving in United States” by Scott Hamilton
The Teamsters union filed suit May 1 to stop Mexican trucks’ extended access to U.S. highways. Passed in December as part of the transportation appropriations bill, permission was granted to trucks entering the United States to travel farther into parts of this country provided they met new safety requirements – requirements the Teamsters feel are not strict enough.
The Teamsters suit contends that the Mexican trucks will not meet the tougher emissions standards of the United States.
The bill requires on-site inspection of Mexican trucking companies with re-inspection every 90 days. It also requires electronic verification of every driver’s license.
However, Mexico does not have strict controls on diesel emissions, and opponents claim this could lead to a dramatic increase in air pollution. Diesel emissions have been linked to cancer, birth defects, and asthma. Opponents also argue that the disparity in the quality of trucks between U.S. and Mexico will increase as U.S. trucks are required to comply with more rigorous standards over the next few years.
The suit sought an emergency ruling to block the law from taking effect May 3. It asked that an environmental assessment be done before the trucks are allowed past the current designated border zones.
Under NAFTA the borders were to be opened by 2000, but lobbying by groups including the Teamsters calling for tighter safety measures have slowed the process.
The Teamsters are joined in the suit by Public Citizen, a non-profit consumer advocacy organization, the California Trucking Association and the Environmental Law Foundation.
( 5/14/02)
( 6/25/02)
While regulations concerning carriers moving between Canada and the U.S. have been reduced, there has been a reluctance to do the same between Mexico and the U.S.
A recent investigation determined that the average 18-wheeler in Mexico is 40% overloaded, carrying a gross vehicle weight of more than 120,000 pounds. If U.S. truckers operated at a similar overcapacity, interstate highways would have a life span of 14 years, as opposed to their 40-year design life.

48. Missouri’s Role According to 1999 report:
1. NAFTA has led to a dramatic increase in exports of Missouri products to Canada and Mexico since it was implemented in 1994.
State exports to NAFTA partners grew 10.4% from Missouri’s exports to Canada reached $2.7 billion and exports to Mexico totaled $608.0 million in 1999.
Missouri’s farm sector benefited from agricultural exports to Mexico in In 1999, agricultural crops ranked as the state’s second-largest export to Mexico, accounting for 17.2% of total exports.

49. Missouri’s Role (continued)
Between 1994 and 1999, Missouri exports to NAFTA partners increased 63.4%.
Canada and Mexico are Missouri’s first- and second-largest export markets, respectively, accounting for 50.5% of Missouri’s total exports 1999.
Exports to NAFTA partners have increased 63.4% since the trade agreement was implemented, representing a 65.5% growth of state exports to Canada and a 54.4% growth of state exports to Mexico. In 1999, Canada and Mexico were Missouri’s first- and second-largest export markets, respectively, accounting for 50.5% of Missouri’s total exports.

50. Mid-Continent International Trade Corridor
1. A trade pattern
2. A system of connecting
highways and rail
routes
3. An opportunity to
strengthen economic
development in a
region
( 3/31/03)
Elements of a corridor: creates a seamless, efficient transportation link providing cost-effective and safe movement of goods and people; links major commercial population centers; facilitates trade through minimizing travel costs and time; links infrastructure development with technology.
( July 2002)
Geographical area that extends from Winnipeg, Canada through Monterrey, Mexico, with specific destination points such as Kansas City, which is located in the middle of the corridor along the Interstates 29 and 35 interchange.
The simplicity and ease of moving and trading along this corridor is indicated by many of its: accessibility from all directions, state-of-the-art transportation facilities, the shortest travel distance between Mexico and Western Canada, traditional and strong transportation roles for both Kansas City and Winnipeg, and large geographical window. All of these characteristics, as well as developments in the area of infrastructure, enhance the ability of businesses to trade along this corridor.
( 5/23/02)
Missouri’s highway system is the sixth largest in the nation and it’s raid hub is the second largest.
In reference to what was said in the theme of trucking, there is a need to develop inland processing centers

51. Missouri and Employment
In 1999, Missouri’s production of goods for export to Canada directly supported approximately 12,989 jobs, while state exports to Canada directly supported an additional 2,808 jobs, for a total of over 15,797 jobs. The actual number of jobs benefiting from trade with NAFTA partners is much higher, once related jobs in transportation, banking, finance, and other sectors are included.

52. The Missouri-Mexico Partnership
The Missouri Department of Economic Development moved its hub to Monterrey
Branch office in Guadalajara
For the past 12 years, the Missouri Department of Agriculture’s headquarters has been in Guadalajara
(Interview with Bronwen Madden )
Monterrey, Guadalajara, and Mexico City form the “Golden Triangle”. State of Nuevo Leon is wealthiest.
Again, Mexico is Missouri’s second largest trading partner.
The Mexico Trade Office is headquartered in Monterrey and maintains a branch office in Guadalajara. Monterrey, the capital of the state of Nuevo Leon and the industrial center of the country.

53. Where is it going and what effects will it have?
NAFTA’s Future
Where is it going and what effects will it have?
( )
( Trade Facts, “Free Trade with Central America: Strengthening Democracy, Promoting Prosperity)
Much like the Canadian FTA was expanded to NAFTA...
President Bush announced his intention to explore an FTA with Central America on Jan. 16, 2002, and notified Congress of his intention to begin free trade negotiations last fall. The first working-level negotiating round began on Jan. 27, 2002, in Costa Rica. Eight additional negotiating rounds are planned, and talks are expected to conclude in Dec
The negotiation with Central America will complement the goal of completing a Free Trade with the Americas (FTAA) by Jan
U.S. Trade Representative Robert Zoellick and ministers from the 5 CA countries announced on Jan. 8, 2003, the launch of negotiations on an agreement to eliminate tariffs and other barriers to trade in goods, agriculture, services, and investment between the U.S. and Central America.
In the negotiations, the U.S. will seek to address high tariffs on U.S. agricultural and industrial goods.
The U.S. exported $9 billion in goods to the five Central American countries in 2001, up 42% since The U.S. is the main supplier of goods and services to Central American economies: 40% of total goods imports by CA come from the U.S. U.S. products face a competitive disadvantage in the region, because CA countries have been very active in negotiating free trade agreements that do not include the U.S. More than 20 trade agreements grant preferences in CA to products from Mexico, Canada, Chile, and several South American nations.
We must also look to the future. Once again, unfortunately for unskilled laborers in the U.S., the trend is toward high technology industries.
( 5/14/02)
U.S.-Central American Free Trade Agreement
Free Trade Area of the Americas (FTAA)

54. Conclusion (www.epinet.org/briefingpapers/nafta01/ 5/13/02)
In the end, when you look at the U.S. economy as a whole, NAFTA doesn't seem to be hurting the machine. In the last two years, 3 million jobs have been added to the work force and the unemployment rate has settled into a stable range of about 5-6% - near the hypothetical natural rate of inflation. After it's all over, it mainly comes down to the simple fact that some people might not be ready to look into the future yet. With NAFTA, the government has implemented it's policy that the U.S. economy is shifting away from unskilled jobs and towards those that require education and skilled. In this regard, NAFTA is much more than a trade agreement, it is a social reform of the highest degree.
( 5/14/02)
Many analysts say it’s too early to judge NAFTA’s impact on U.S.-Mexico trade, in part because many of its provisions have yet to take effect. While some tariffs and nontariff barriers were eliminated immediately, others phase out gradually through 2008.
Has both created and eliminated jobs, allows for countries to operate at their comparative advantage, is the first level of economic integration, we’ll have to see what happens with Zapatistas’ struggle, increased exports...