NAFTA

North American Free Trade Agreement

References
 http://useconomy.about.com/od/tradepolicy/p/NAFTA_History.htm
 http://useconomy.about.com/od/tradepolicy/p/NAFTA_Advantage.htm
 http://webcas.cas.suffolk.edu/royo/mexico/sld009.htm
 http://investincanada.gc.ca/eng/advantage-canada/nafta-advantage.aspx
 http://findarticles.com/p/articles/mi_m1052/is_n1_v115/ai_15149318/pg_3/?
tag=content;col1
 http://www.ibtimes.com/contents/20090707/unveiling-latin-americaeconomic-
success.htm
 http://www.naftaworks.org/benefits-of-nafta.php
 http://www.kwintessential.co.uk/articles/article/Canada/Canadian-Benefits-of-
NAFTA/2775
 http://www.ncpa.org/pub/ba619
 http://www.canada.com/vancouversun/news/editorial/story.html?id=03a50730-
0fa5-4062-8b25-66e3a32f0115
 North American Free Trade Agreement (NAFTA) - duties, benefits
http://www.referenceforbusiness.com/encyclopedia/Mor-Off/North-American-
Free-Trade-Agreement-NAFTA.html#ixzz16yqjZvli
 http://www.referenceforbusiness.com/encyclopedia/Mor-Off/North-American-
Free-Trade-Agreement-NAFTA.html
• January 1994 – United States, Canada &
Mexico

• World’s largest free trade area – links 444

million people

• Trade liberalization

• Elimination of tariffs

• Economic Growth
Need for NAFTA
• Grant the signatories ‘Most Favored
Nation’ status

• Eliminate barriers to trade

• Facilitate the cross-border movement of

goods and services

• Promote conditions of fair competition

• Increase investment opportunities

• Provide protection and enforcement of

intellectual property rights

• Procedures for the resolution of trade disputes

• Framework for further trilateral, regional and

multilateral cooperation to expand NAFTA's
benefits
NAFTA

Contributions & Benefits

Increased Trade

• Trade between the NAFTA signatories tripled,

from $297 billion in 1993 to $1 trillion in
2007
• Canada also has benefited from an increase of
trade in services.
Boosted US Farm Exports

• NAFTA increased farm exports because it eliminated

high Mexican tariffs

• Mexico is the top export destination for beef, rice,

soybean meal, corn sweeteners, apples and beans

• As a result of NAFTA, the percent of U.S. agricultural

exports to Canada and Mexico has grown from 22%
in 1993 to 30% in 2007
Trade Surplus in
Services

• Export of services – financial & healthcare - to

nearby countries

• NAFTA requires governments to publish all

regulations, lowering hidden costs of doing business
Reduced Oil and Grocery
Prices

• The U.S. imported $157.8 billion in oil from Mexico

and Canada

• Reduced U.S. reliance on oil imports from the Middle

East and Venezuela
 Elimination of tariffs
• Tariffs on all farm products phased out

• Producers of certain "sensitive" products allotted extra

time to adjust gradually to competition from products of
other NAFTA countries

• U.S. automobile manufacturers have gained greater access

to Mexican market

• Mexico’s telecommunication system

Stepped Up Foreign Direct Investment

• U.S. foreign direct investment (FDI) in Canada and Mexico

more than tripled to $348.7 billion

• Reduced investors' risk by guaranteeing they will have the

same legal rights as local investors

• Investors can make legal claims against the government if

it nationalizes their industry or takes their property by
eminent domain
 Environment

• NAFTA is more protective of the environment than any

other international agreement or treaty ever before
entered into by the United States

• Promoted communication about environmental problems

among governments, citizens, and environmental groups
from the three NAFTA countries

• Failure to enforce environmental laws and regulations

results in sanctions suspension of trade benefits
Dispute resolution

• Administration of NAFTA is handled by a commission

composed of ministers designated by each NAFTA
country

• A secretariat serves the commission and assists with

the administration of dispute resolution panels
Closer to the US than . . . the US

• Many Canadian production

hubs are actually closer to
target U.S. markets than
American production sites

• Of Canada's 20 largest cities,

17 are within an hour and a
half drive of the United States
and many are much closer
Smart Borders

• To accommodate the growth in trade and commerce,

Canada and the United States have signed a pact to work
together to create a Smart Border

• Collaboration in identifying and addressing security

risks

• Expediting the legitimate flow of people and goods

across the Canada-US border.
Access to Latin America
The North American Free Trade Agreement
(NAFTA) gives you access to the entire
continent and entrée to Latin America
Generating Jobs

• Standards of living have steadily been rising

• The improvements in living conditions are in part due to the

generation of jobs

• Under NAFTA businesses have become more profitable and

competitive leading to job creation in Canada and the other
partnered countries

• The increased economic activity helps generate jobs

• One in five Canadian jobs is at least in part related to trade

 Protection of intellectual
property rights

• NAFTA builds on the work of the General Agreement on

Tariffs and Trade (GATT), providing substantial
protection for intellectual property

• NAFTA includes details regarding procedures for

• Enforcement of intellectual property rights

• Damages in the event of violations of such rights
Agreement on labor

• "Labor Side Agreement," was negotiated in response to

concerns that NAFTA itself did little or nothing to
protect workers

• To create new employment opportunities

• To protect, enhance, and enforce basic workers' rights
• Affirming respect for each party's constitution and laws

• Transparency among the three countries regarding

their respective labor laws and their enforcement of
those laws
Criticism
U.S Employment rates

• Net manufacturing employment declined by 3,654,000

(1994-2007)

• U.S exports vs. imports to Mexico ($107 bn vs $136 bn)

• Trade deficit ($29 billion)

• Gap between rich and poor

• Increase in Mexican migrants

Mexico Agriculture

• Opening competition to heavily subsidized U.S farm

industry

• Crippled Mexican farming industry

• Increase in the number of Mexican migrants

Mexican Energy Industry

• World’s sixth largest producer of crude oil

• Second largest oil supplier to U.S

• Insignificant domestic investments

• Declining production – PEMEX

• Mexico becoming a net oil importer

Trucking Industry not liberalized

• U.S federal policy to unload cargo in commercial

zones

• Lack of liberalization of transportation

• Delay in opening U.S markets to Mexican truckers

• Costs U.S $200-400 million/ year

Canadian Companies

• Mel Hurtig – more than 10,000 Canadian companies

taken over by foreigners.

• 98% of FDI in Canada for foreign takeovers

NAFTA – Chapter 11 & 19

• Chapter 11 allows corporations to sue Mexico, U.S

and Canada in case of failed investment

• Chapter 19 allows Antidumping and countervailing

duty determinations with binational panel review

• Applies a panel of individuals instead of international

law!!
Defense
U.S. Employment

• Misconception – foreign competition hurts U.S

employment

• Greater benefits of free trade dispersed

• Losses concentrated in a few sectors only

• Job losses balanced by job creation in other sectors

U.S. Employment

• U.S employment 110 million – 137.6 million (1993-

2007), 24% increase

• U.S unemployment rate averaged 5.1 % after NAFTA

vs. 7.1 % before NAFTA
Increased Trade U.S- Mexico
 Increased Trade U.S - Canada

• The volume of trade has tripled since

1994

• Economic growth has soared

• Businesses have become more

competitive

• Millions of jobs created

 Total trilateral trade
– In billions of U.S dollars -

• U.S - Canada Trade grown

by 156%
($199 bn – 509 bn)

• Canada- Mexico Trade

increased by 339% ($4.1
bn-18 bn)

• U.S – Mexico increase by

302.6% ($85.2bn – 343 bn)
 Trucking and PEMEX

• Provides a net benefit to both the countries

• Needs a policy revision nevertheless

• Withdrawing from the international trading system would be

unwise

• Allowing the EU and Asian countries to take the lead

• Economic liberalization is a challenge but….

• Mexico will become a large and growing domestic market with

the help of NAFTA
CONCLUSIONS
• Strengthened trade and economic relations
between the three countries

• More competitive North American platform

• Opportunities in the global marketplace

• Sustaining growth against Asia and South

America
Questions