Nafta

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which are summarized below.
Assumptions made for Heckscher Ohlin (HO) Theory Model
1. There are two countries using two factors of productions, capital and labor, to produce two goods.

2. Identical production functions exist in both countries.
3. Production functions in both countries display constant returns to scale.
4. One of the commodities is capital intensive at all input prices, the other is labor intensive.
5. Perfect competition in both commodities and factor markets, as well as full employment of resources exists in both nations.
6. Both nations have identical tastes.
7. There are no transportation or similar costs and no barriers to free international trade.
8. Perfect factor mobility exists within each nation but not between nations.
9. Neither country has complete specialization in production.
It is likely that the proponents of this agreement invoke the Theory of Comparative Advantage and the HO Theory, although it is fair to say that many advocates are concerned with some particular self interest they have. Of course, opponents may also be more concerned with self interest than national or global welfare.
The opponents of NAFTA include labor and environmental groups, among others. Labor groups voiced their fears of wage and benefit reductions that would be asked for in the name of competitiveness, as well as their fears of complete job displacement. They foresaw American companies moving to Mexico to reap the ultra cheap labor and lax environmental laws. Environmentalists envisioned more severe environmental degradation in Mexico where environmental laws are lax and often unenforced. They also predicted that there would be a weakening of America's present environmental laws in the name of staying competitive with Mexico. Critics include labor leaders such as John Sweeney, president of the AFL-CIO, and some political figures such as Rep. Richard Gephardt, House Minority leader. The Sierra Club, an enviro...