The United States has been experiencing steadily growing global trade deficits for nearly three decades, and these deficits accelerated rapidly after NAFTA entered into force on January 1, 1994. For the purposes of this report, it is necessary to distinguish between domestic-produced exports and foreign exports, which are goods produced in other countries but exported to the United States and then re-exported from the United States. Foreign exports accounted for 11.6 percent of total U.S. exports to Mexico and Canada in 2002. However, since only domestically produced exports create jobs in the United States, our trade calculations are based only on domestic exports. Our measure of the net impact of trade, which is used here to calculate the employment content of trade, is the difference between domestic exports and total imports.3 We call this « net exports » to distinguish it from the more frequently reported gross trade balance. However, both concepts are measures of net trade flows. Thanks to NAFTA, Mexico has lost nearly 1.3 million jobs in the agricultural sector. The 2002 Farm Bill subsidized the U.S. agricultural industry up to 40% of net farm income. When NAFTA lifted tariffs, companies exported corn and other grains to Mexico at a price below cost. Rural Mexican farmers could not compete.

At the same time, Mexico reduced its subsidies to farmers from 33.2 per cent of total agricultural income in 1990 to 13.2 per cent in 2001. These changes have meant that many Mexican smallholder farmers have been driven into bankruptcy by heavily subsidized U.S. farmers. In the context of current U.S. trade deficits and increasing trade liberalization, the pervasive threat by employers to close or relocate factories could have a greater impact on real wage growth for manufacturing workers than real competition from imports. There are no empirical studies on the impact of such threats on wages in the United States, so these costs have been underestimated. Bronfenbrenner updated his earlier study with a new survey of the effects of the threat in 1998 and 1999, five years after NAFTA came into force (Bronfenbrenner 2000). In his updated study, Bronfenbrenner noted that most employers continue to threaten to shut down all or part of their operations during organizing campaigns, even though unions have shifted their organizational activity over the past five years from the industry changes most affected by trade deficits and capital flight (e.g.

B, clothing and textiles, electronic components, food processing and metal manufacturing). According to the updated study, the threat rate in mobile industries such as manufacturing, communications, and wholesale has risen from 62 percent to 68 percent. The threat rate was only 36% in real estate industries such as construction, health and education. In 18% of union certification campaigns with threats, the employer directly threatened to move to another country, usually Mexico, if the union managed to win the election. The good thing about a free trade area is that it promotes competition, which consequently increases a country`s efficiency in being on an equal footing with its competitors. .