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    North American Free Trade Agreement

    From Ballotpedia - Reading time: 5 min

    The North American Free Trade Agreement, or NAFTA, is an agreement between Canada, Mexico, and the United States to eliminate trade barriers and promote trade competition between the three nations. Provisions of the agreement include the elimination of trade duties, taxes levied on foreign goods, on many goods. The agreement also provided for reductions in tariffs, another kind of tax on imports and exports, intellectual property enforcement, and agreements for favorable treatment of investors from these three nations. This favorable treatment means the three nations must treat investors from each other as equally as investors from their own nations. NAFTA came into effect on January 1, 1994, and superseded a prior trade agreement between the United States and Canada, the Canada–United States Free Trade Agreement. In addition to this agreement, two side agreements were passed to address other concerns: the North American Agreement on Environmental Cooperation and the North American Agreement on Labor Cooperation.[1]

    HIGHLIGHTS
  • The North American Free Trade Agreement is a trade agreement between Canada, Mexico, and the United States, creating a trade bloc in North America.
  • The goal of NAFTA was to eliminate trade barriers between the three nations, including reducing and in some cases eliminating tariffs and protecting intellectual property.
  • NAFTA was signed into law by President Bill Clinton on December 8, 1993, and took effect on January 1, 1994.

    • History[edit]

    Passage of NAFTA followed years of trade negotiations between United States President George H. W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas. These three leaders signed a trade agreement in 1992, but the agreement needed to be ratified by each nation's legislation before going into action. Further negotiations on an agreement continued into 1993, by which time Bush's term ended and Clinton took the office of president. Clinton added two side agreements to the bill to address labor and environmental concerns. On November 17, 1993, the House of Representatives passed the North American Free Trade Agreement Implementation Act, an act to implement the trade agreement. The Senate version passed 3 days later. On December 8, 1993, Clinton signed the Implementation Act into law. The agreement went into effect at the beginning of the next year, January 1, 1994.[2][3]

    Components[edit]

    Trade[edit]

    A key provision of NAFTA is the reduction of tariffs. While most goods moved between Canada and the United States were already duty-free prior to the passage of NAFTA, the agreement immediately reduced tariffs on most of Mexico's imports into the United States, and over one-third of United States exports to Mexico. As part of the agreement, tariffs were to be eliminated completely within 15 years. As of January 1, 2008, tariffs between Canada, Mexico, and the United States had been completely eliminated.[1][4]

    NAFTA also requires the three nations to trade foreign investments from each other as favorably as domestic investments. For example, as part of the agreement the United States could not require investors from Mexico to have more equity in an enterprise than an American investor. These nations are also not permitted to use nationality as a basis for disposing of or preventing an investment in their nation. As part of this provision, any of the nations that allege a government that has signed the agreement has violated the provision may request arbitration from the World Bank's International Centre for the Settlement of Investment Disputes, ICSID's Additional Facility Rules, the rules of the United Nations Commission for International Trade Law, or a domestic court in their nation.[5]

    Environment[edit]

    One of the side agreements, the North American Agreement on Environmental Cooperation (NAAEC), was designed to address environmental concerns arising from NAFTA. The NAAEC is an agreement between Canada, Mexico, and the United States requiring the nations to commit to certain environmental protection policies. Each party must issue a report on the state of its environment, develop emergency preparedness measures, and promote environmental education and research. Parties that fail to meet these standards are subject to the dispute resolution processes created by NAFTA. The NAAEC also allows for private organizations to submit complaints regarding a member nation if they believe the nation is not fulfilling its obligations under NAAEC, a provision that does not exist regarding trade as part of NAFTA.[6][7]

    Debate[edit]

    NAFTA has been a subject of debate, both before and after its passage. In the United States, concerns about the agreement included worries of American jobs moving to Mexico. President Clinton, who signed NAFTA into law, said the following in regards to those concerns:[8]

    “ Well, if we don't pass NAFTA, that could still be true. The lower wages and the lower cost of production will still be there. But if we do pass it, it means dramatically increased sales of American products made right here in America.[9] ”
    —President Bill Clinton

    Critics of NAFTA have cited the decline of American manufacturing jobs and the rise of Mexican manufacturing jobs as a results of the agreement. On his transition team's website, President Donald Trump criticizes agreements like NAFTA, saying the following:

    “ Yet, too many American jobs have been lost over the last decade because of trade deals that do not put Americans first. Factories have closed and jobs have moved overseas because the government has imposed crushing regulations and taxes, while it negotiated trade deals that incentivized American companies to make things abroad, where environmental and labor protections are minimal and wages are low.[9] ”
    —President Donald Trump

    Defenders of NAFTA have argued that NAFTA is not to blame for the loss of jobs. There are differing theories explaining the loss of American manufacturing jobs. One alternate explanation is the rise of automation in manufacturing. A report from Ball State University researchers argues that automation has increased the productivity of manufacturing, which has led to a decrease in the amount of labor needed, and thus the elimination of jobs.[10]

    Additional concerns included the trade balance between Mexico and the United States. In the years prior to NAFTA's passage, the two nations averaged a balanced trade, and since its passage, the United States has had a growing trade deficit with Mexico. However, how much of this deficit is because of NAFTA and how much is the result of other factors is a subject of debate, with some, such as Fortune, arguing that looking at the deficit is a bad way to judge trade imbalance, and that when considered in conjunction with American exports to Mexico, the deficit is not as bad as some state.[11]

    See also[edit]

    External links[edit]

    Footnotes[edit]

    1. ↑ 1.0 1.1 NAFTA Secretariat, "North American Free Trade Agreement," accessed November 22, 2016
    2. ↑ Library of Congress, "H.R.3450 - North American Free Trade Agreement Implementation Act," accessed December 1, 2016
    3. ↑ Time, "NAFTA," December 30, 2008
    4. ↑ NAFTA Now, "FAQ," accessed November 22, 2016
    5. ↑ NAFTA Secretariat, "Overview of the Dispute Settlement Provisions," accessed November 22, 2016
    6. ↑ NAFTA Now, "North American Free Trade Agreement," accessed November 22, 2016
    7. ↑ Goverment of Canada, "North American Agreement on Environmental Cooperation (NAAEC)," accessed December 1, 2016
    8. ↑ NPR, "What Has NAFTA Meant For Workers? That Debate's Still Raging," December 17, 2013
    9. ↑ 9.0 9.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    10. ↑ Ball State University Center for Business and Economic Research, "The Myth and Reality of Manufacturing in America," June 2015
    11. ↑ Fortune, "Is Donald Trump right that Mexico is 'killing us' on trade?" August 10, 2015
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