North American Free Trade Agreement

North American Free Trade Agreement

( NAFTA )
I. Scope
NAFTA Population:
15 Nation EU Population:
NAFTA GNP:
EUROPE GNP:
Size of Trade Relationships:
U.S./Canada:
U.S./Mexico:
Canada/Mexico:

387 million
373 million
$8 trillion
$8 trillion
$406 billion
$248 billion
$ 20 billion

Top Ten 2000 U.S. Trading

Partners ($ billions)
Country

2-2

U.S. Exports

Canada
Mexico
Japan
China
Germany
United Kingdom
South Korea
Taiwan
France
Singapore

Irwin/McGraw-Hill

$176.4
111.7
65.3
16.3
29.3
41.5
27.9
24.4
21.0
17.4

U.S. Imports

Total

Surplus/
Deficit

$229.2
135.9
146.5
100.0
558.7
43.5
40.3
40.5
29.0
19.6

$405.6
247.6
211.8
116.3
88.0
85.0
68.2
64.9
50.0
37.0

-$52.8
-24.2
-81.3
-83.8
-29.5
-1.9
-12.4
-16.1
-8.0
-2.2

Copyright2002 by The McGraw-Hill Companies, Inc. All rights reserved.

NAFTA
II.

History

U.S./Canada Free Trade Agreement

January 2, 1988
Impacts on the Agreement:

signed on

Elimination of duties
Direct investment in the other country made easier
Easier to market services in the other country
Provides dispute resolution mechanism

USCFTA not without controversy

USCFTA consistent with GATT

NAFTA

III. General Reasons for Free Trade Agreements

- 1. Limits on GATT
- 2. Allows for specialization in terms of
comparative
advantage
- 3. Increases potential exports for all parties

IV.

Enter Mexico (NAFTA)

Political Change
Skyrocketing Trade

NAFTA
V.

Advantages of NAFTA for Mexico

In spite of being resource rich, Mexicos population

growing faster than the number of jobs. Needs
investment, technology, and exports to spur the economy.

VI. Advantages of NAFTA to U.S.

Access to Mexican Labor and Markets

Note: all three nations need the agreement to

compete more effectively in world markets

NAFTA
VII. Primary Objections to NAFTA
- 1. Fears of Lost Jobs (U.S./Canada)
- 2. Exploitation of Mexican Labor
- 3. Environmental Laws
- 4. Fears of Loss of Cultural Identity
(Canada/Mexico)

What NAFTA Will Do

- 1. Help Open Mexican Market
- 2. Increase Trade
- 3. Lower Prices
- 4. More Competitive Industries (Globally)

What NAFTA Will Not Do

- 1. 50% N.A. Origin Needed to Qualify
- 2. Decrease Paperwork
- 3. Eliminate Technical Standards
- 4. Lead to Standardized Transportation

Classifications/Groups
- Group of 7 Industrialized
- NICs
- LDCs

Market Characteristics
- Purchasing Power Parities

Policy Toward Foreign Investment

-Varies by country