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If trade barriers are reduced, national producers do have to adjust to competition by importers. These costs are outweighed by access to cheaper products, however.

The central problem is that the benefits of trade liberalization are not shared by all countries, even though the elites of those countries might share a similar world view and similar economic interests. Furthermore, the costs of adjustment are always borne by working people and the poor of each country. Will the government be there to support people through the change, or will some people be left out of the new economy?

Yes, corporations now see their hopes for continued profitability in terms of their access to foreign markets. But, this is not because U.S. based firms simply wish to export their products to consumer markets in Mexico and the rest of Latin America. In fact, U.S. based corporations also want to secure access to foreign labour markets. They want access to the natural resources of other countries as well.

This is a very important point, since it helps us see the link between trade and investment issues. For a long time now, a large proportion of the international trade in goods has been intrafirm trade. A 1988 study reports over one-third of trade U.S. merchandise imports from Canada takes place between different units of U.S. based multinational companies.1 The figure is much larger if you consider merchandise export from Mexico to the United States as well.

The cheap products that enter northern economies are, for the most part, resources and component parts of larger production processes. The consumers are actually multinational corporations seeking to reduce their production costs through off-shore sourcing.

1. Scott Sinclair, NAFTA and US Trade Policy: Implications for Canada and Mexico in Ricardo Grinspun and Maxwell Cameron, (eds) The Political Economy of North American Free Trade, (Montreal and Kingston: McGill-Queens University Press, 1993), 222.

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