You are on page 1of 36


The North American Free Trade Agreement (NAFTA) is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the CanadaUnited States Free Trade Agreement between the U.S. and Canada. In terms of combined purchasing power parity GDP of its members, as of 2007the trade bloc is the largest in the world and second largest by nominal GDP comparison. On January 1, 1994, history was made when the North American Free Trade Agreement (NAFTA) went into effect. NAFTA is in a sense a Trojan horse, attractive outwardly but filled with a host of unpleasant surprises. In simple terms, NAFTA is a treaty between Canada, Mexico, and the United States to make the transportation of goods, services, and capital across national boundaries more "hassle-free". Sounds perfect until you take a closer look. NAFTA promises a lot of benefits but these benefits come at a high price. The truth about NAFTA is that it is a clever deception. One of the results of NAFTA is that hundreds of thousands of Americans lost their jobs when American corporations moved their factories "hassle-free" to Mexico, where wages are lower, unions have less power, and environmental regulations are more relaxed. Crops from U.S. agricultural businesses are exported to Mexico and sold at such low prices that many Mexican farmers are unable to compete and consequently lose their land. Desperate Mexican workers who get jobs in the newly built American factories receive very low pay, and are forced to work long hours. Also, they are threatened when they try to stand up for their rights. The

lack of environmental protection in Mexico has led to increased air and water pollution in that country, especially along the U.S. and Mexican borders The NAFTA and the European Union comprising 27 countries constitute the largest trading blocs in the world. In 2008, the value of exports of goods and services from the European Union to the NAFTA region amounted to 450.2 billion Euros while the value of imports of goods and services to the European Union from the NAFTA bloc amounted to 362.1 billion Euros. The two trade blocs are also highly interdependent through foreign direct investment (FDI). In 2007, EU stocks of FDI in the NAFTA region was about 1.25 trillion Euros while the relevant figure of the NAFTA in the EU bloc was about 1.15 trillion Euros.

For Canada the European Union is the second most important trade partner. In 2008, the exports of goods and services from the European Union to Canada was about 37.4 billion Euros. EU imports from Canada amounted to about 33.3 billion Euros during the same year. Trade between Canada and the European Union is dominated by high-value goods such as machinery, transport equipment and chemicals. Recently, Canada has expressed an interest in negotiating a free trade agreement with the European Union. Indeed, an economic summit was held with the European Union in October of 2008 to start off the negotiations for deeper economic integration, beyond the level of the NAFTA. This desire for a bilateral approach is driven by a need to diversify Canadas trade across countries. The United States and the EU together account for about half the world economy. Furthermore, the US-EU relationship drives the world economy as either the EU or the US is also the largest trade and investment partner for almost all other countries in

the world economy. In 2008, the European Union exported goods and services to the United States worth 384.3 billion Euros while imported goods and services in the amount of 315.8 billion Euros from the United States. The European Union is Mexicos second largest market after the United States. The EU and Mexico have established a free trade agreement (FTA) which came into force in October 2000. The EU-Mexico FTA is one of the most comprehensive in the world economy. It covers trade in goods as well as services1. In 2007, The EU exported goods and services worth 25.5 billion Euros to Mexico and imported goods and services worth 15.4 billion Euros from Mexico. Thus the European Union maintains a trade surplus with respect to all the NAFTA countries. The main objectives of my project are the following: 1. To investigate the effects of a bilateral free trade agreement between

Canada and the European Union on output and exports for different sectors of Canada. 2. To explore the effects of a common free trade agreement between the

European Union and NAFTA on various trade related variables in NAFTA countries. 3. To examine the effects of a common free trade agreement between the NAFTA on non-member countries especially the

European Union and developing countries

2. Members of NAFTA
The North American Free Trade Agreement (NAFTA) is a treaty entered into by the United States, Canada, and Mexico; it went into effect on January 1, 1994. (Free trade had existed between the U.S. and Canada since 1989; NAFTA broadened that arrangement.) On that day, the three countries became the largest free market in the worldthe combined economies of the three nations at that time measured $6 trillion and directly affected more than 365 million people. NAFTA was created to eliminate tariff barriers to agricultural, manufacturing, and services; to remove investment restrictions; and to protect intellectual property rights. This was to be done while also addressing environmental and labor concerns (although many observers charge that the three governments have been lax in ensuring environmental and labor safeguards since the agreement went into effect). Small businesses were among those that were expected to benefit the most from the lowering of trade barriers since it would make doing business in Mexico and Canada less expensive and would reduce the red tape needed to import or export goods.

3. Foundation of NAFTA
PUERTO VALLARTA, MEXICO - Following the May 28 meeting of the NAFTA Free Trade Commission, Mexican Secretary of Economy Luis Ernesto Derbez, United States Trade Representative Robert B. Zoellick, and Canadian Minister for International Trade Pierre S. Pettigrew are pleased to release the following Joint Statement which outlines the overall results: As we look back over the eight years since NAFTA entered into force, we are pleased with its unconditional success. The Agreement has brought economic growth and rising standards of living for people in all three countries. In addition, NAFTA has established a strong foundation for future growth and has set a valuable example of the benefits of trade liberalization. Since 1994,our trilateral trade has more than doubled, now surpassing US$622 billion, more than US $1.7 billion is traded every day through our borders. Investment in our three countries has also grown significantly, making North America one of the most competitive, prosperous and economically integrated regions in the world. As we approach January 1, 2003, when nearly all tariffs between our three countries will be eliminated, we are pleased to note that the ultimate goal of the NAFTA of lowering costs for producers and lower prices for consumers is being achieved. In looking at the future, we reaffirmed our determination to complete the full implementation of the Agreement according to the established schedule and directed officials to review the prospects of additional trilateral work that could stimulate further the trade between our three countries to allow the realization of the full potential of a more integrated and efficient North American economy.

We reviewed the operation of Chapter 11 of the NAFTA and directed experts to continue their work examining the implementation and operation of Chapter 11, including developing recommendation as appropriate. To better undertake this task, we directed our experts to identify shared priorities concerning the operation of Chapter 11 and to report to the Free Trade Commission actions as appropriate. The experts are to report to Ministers on a regular basis and, at a minimum, prior to the next meeting of the NAFTA Deputies in the Fall of 2002. We view this work as a necessary and highly beneficial to the effective and proper implementation of the Chapter as well as to increase public understanding of the operation of the Chapter. We reaffirmed our strong support for further regional and multilateral trade liberalization, and especially the cooperation among, and leadership shown by, the NAFTA partners. These efforts should serve as a model for cooperating amongst ourselves in other regional and global fora, such as the Asia-Pacific Economic Cooperation (APEC) and the World Trade Organization (WTO). In APEC we are cooperating to implement the elements of 2001 APEC Leaders Declaration, in particular those contained in the Shanghai Accord on transparency, trade facilitation and the new economy, as well as those relating to WTO capacity building and biotechnology. We are committed to achieve significant progress in the WTO negotiations by the 5th Ministerial to be held in Cancun in September 2003, and to complete the negotiations by January 2005. We are pleased that in the Free Trade Area of the Americas we have been able to initiate market access negotiations. This should enable us to keep on track to conclude the FTAA

negotiations no later than January 2005. Our negotiators continue to make progress on consolidating the text and we look forward to reviewing the new texts at the FTAA Ministerial in November. We will work with the smaller economies so that all countries can meet the agreed negotiating deadlines. We reached agreement on a trilateral communications workplan to inform the public of the success of the agreement, to disseminate information, and to promote transparency for better understanding of the agreement. We have published a trilateral brochure on NAFTA's 8th year, which can be found at our ministries web sites. Finally, we agreed that Canada will host the next NAFTA Commission Meeting at the Ministerial level next year.

4. NAFTA (North American Free Trade Agreement)

North American Free Trade Agreement The term "Agreement" refers to the North American Free Trade Agreement. It is the actual text of the preferential trade agreement between Canada, Mexico and the United States as implemented January 1, 1994.

- Customs Procedures This topic includes various subjects such as Certificate of Origin, Advance Rulings, NAFTA Claims, Verifications, Determinations, and Appeals to name a few. This information is gathered from a variety of Customs published documents. - Determinations Determinations are issued by the customs administrations as a result of a NAFTA verification. Determinations are binding on the exporter and/or producer and may be appealed.

Drawback Drawback is a refund, reduction or waiver in whole or in part of Customs duties collected upon importation of an article or materials which are subsequently exported. Under NAFTA, this refunded amount is the lesser of the amount of duties paid upon importation into the NAFTA territory and the total amount paid on the finished good is the NAFTA country to which it is exported. Drawback became effective for trade between Canada and the United

States on January 1, 1996, and for trade between Mexico, the United States and Canada, this program became effective on January 1, 2001. Duties (Tariff Elimination) and Fees

Goods brought into Canada, Mexico and the United States are subject to customs duties and taxes. Each country has its own rate of duties. The amount of duties charged is based on the harmonized tariff system classification number. - Intellectual Property Right NAFTA details specific conditions regarding the nature and scope of responsibility with respect to intellectual property rights of the United States, Mexico, and Canada. Intellectual property rights refers to copyright and related rights, trademark rights, patent rights, rights in layout designs of semiconductor integrated circuits, trade secret rights, plant breeders' rights, rights in geographical indications and industrial design rights. - NAFTA Rulings NAFTA rulings are specific rulings issued by the customs authority on NAFTA issues.

NAFTA Verification/Audit Manual The NAFTA Verification/Audit Manual is developed to support the verification of goods for which NAFTA preferential tariff treatment has been claimed comply with the rules of origin. This trilateral guide details the recommended technical verification framework to be observed by each Party when conducting NAFTA verifications. This trilaterally agreed upon manual also provides significant automobile information.

Packaging Under NAFTA, packaging and packing are used in different contexts. Packing refers to the materials and containers used to protect a good during transportation, but does not include packaging materials and containers.

- Penalties Under NAFTA, Canada, Mexico or the United States may impose criminal, civil or administrative penalties for violation of their laws and customs procedures. Post Importation NAFTA Claims Generally, NAFTA claims are made at the time of importation. However, NAFTA allows for a NAFTA claim to be made by the importer within one year from the date of importation. - Recordkeeping All records related to a preferential duty claim under NAFTA must be kept for a minimum of five years.

Repairs and Alterations Under the NAFTA, Canada, Mexico and the United States do not assess customs duties on goods that have been repaired or altered within the NAFTA territories regardless of origin.

Rules of Origin (Preference Criteria) Rules of Origin includes both the General Rules of Origin used to determine whether or not a good or material is eligible for NAFTA preferential treatment and the Specific Rules of Origin used to determine if a foreign material becomes originating in the NAFTA territories.

Role of NAFTA

to reduce barriers to trade to increase cooperation for improving working conditions in North


to create an expanded and safe market for goods and services

produced in North America

to establish clear and mutually advantageous trade rules to help develop and expand world trade and provide a catalyst to

broader international cooperation

Trade of NAFTA
Exports The NAFTA countries (Canada and Mexico), were the top two purchasers of U.S. exports in 2010. (Canada $248.2 billion and Mexico $163.3 billion). U.S. goods exports to NAFTA in 2010 were $411.5 billion, up 23.4% ($78 billion) from 2009, and 149% from 1994 (the year prior to Uruguay Round) and up 190% from 1993 (the year prior to NAFTA). U.S. exports to NAFTA accounted for 32.2% of overall U.S. exports in 2010. The top export categories (2-digit HS) in 2010 were: Machinery ($63.3 billion), Vehicles (parts) ($56.7 billion), Electrical Machinery ($56.2 billion), Mineral Fuel and Oil ($26.7 billion), and Plastic ($22.6 billion). U.S. exports of agricultural products to NAFTA countries totaled $31.4 billion in 2010. Leading categories include: red meats,

fresh/chilled/frozen ($2.7 billion), coarse grains ($2.2 million), fresh fruit ($1.9 billion), snack foods (excluding nuts) ($1.8 billion), and fresh vegetables ($1.7 billion). U.S. exports of private commercial services* (i.e., excluding military and government) to NAFTA were $63.8 billion in 2009 (latest data available), down 7% ($4.6 billion) from 2008, but up 125% since 1994.

Imports The NAFTA countries were the second and third largest suppliers of goods imports to the United States in 2010. (Canada $276.5 billon, and Mexico $229.7 billion). U.S. goods imports from NAFTA totaled $506.1 billion in 2010, up 25.6% ($103 billion), from 2009, and up 184% from 1994, and up 235% from 1993. U.S. imports from NAFTA accounted for 26.5% of overall U.S. imports in 2010. The five largest categories in 2010 were Mineral Fuel and Oil (crude oil) ($116.2 billion), Vehicles ($86.3 billion), Electrical Machinery ($61.8 billion), Machinery ($51.2 billion), and Precious Stones (gold) ($13.9). U.S. imports of agricultural products from NAFTA countries totaled $29.8 billion in 2010. Leading categories include: fresh vegetables ($4.6 billion), snack foods, (including chocolate) ($4.0 billion), fresh fruit (excluding bananas) ($2.4 billion), live animals ($2.0 billion), and red meats, fresh/chilled/frozen ($2.0 billion). U.S. imports of private commercial services* (i.e., excluding military and government) were $35.5 billion in 2009 (latest data available), down 11.2% ($4.5 billion) from 2008, but up 100% since 1994. Trade Balances The U.S. goods trade deficit with NAFTA was $94.6 billion in 2010, a 36.4% increase ($25 billion) over 2009. The U.S. goods trade deficit with NAFTA accounted for 26.8% of the overall U.S. goods trade deficit in 2010.

The United States had a services trade surplus of $28.3 billion with NAFTA countries in 2009 (latest data available). Investment U.S. foreign direct investment (FDI) in NAFTA Countries (stock) was $357.7 billion in 2009 (latest data available), up 8.8% from 2008. U.S. direct investment in NAFTA Countries is in nonbank holding companies, and in the manufacturing, finance/insurance, and mining sectors. NAFTA Countries FDI in the United States (stock) was $237.2 billion in 2009 (latest data available), up 16.5% from 2008. NAFTA countries direct investment in the U.S. is in the manufacturing, finance/insurance, and banking sectors. (a) cross the eliminate border barriers movement territories to of, trade goods of in, and the and facilitate the


between Parties;

(b) promote conditions of fair competition in the free trade area;

(c) increase substantially the investment opportunities in thier territories;

(d) provide adequate adn effective protection and enforcement of intellectual property rights in each Party's territory;



effective of this and



the and of

implementation for its

and joint and

application administration

Agreement, the resolution


(f) and


framework cooperation

for to

further expand

trilateral, and

regional the



benefits of this Agreement.

When the North American Free Trade Agreement was first signed in 1994, proponents said it would eventually create jobs for the U.S. economy. 17 years later, a new report estimates, the American worker only has hundreds of thousands of job losses to show for it. According to a report by Economic Policy Institute economist Robert Scott, entitled "Heading South: U.S.-Mexico trade and job displacement after NAFTA," an estimated 682,900 U.S. jobs have been "lost or displaced" because of the agreement and the resulting trade deficit. The historic agreement, signed just three years after the collapse of the Soviet Union, tore down trade barriers between the U.S., Canada and Mexico, making trade and investment easier for businesses without allowing for the cross-border movement of labor. Despite the agreement being considered a boon for Mexico, the country's economy grew only 1.6 percent per capita on average between 1992 and 2007, The New York Times reported in 2009. The EPI's calculation of 682,900 jobs lost to NAFTA takes into account jobs created as a result, too. Last year, for example, U.S. exports to Mexico supported 791,900 jobs. It's just that those jobs created pale in comparison to the 1.47 million U.S. jobs that would be necessary without the imports resulting from NAFTA, the report found. Still, the number of jobs lost to NAFTA looks minimal when placed against the havoc freaked by the financial crisis. Only in 2008, at the height of the crisis, the U.S. economy hemorrhaged 2.6 million jobs, according to CNNMoney.

The U.S. is currently considering a similar trade agreement with South Korea, called U.S.-Korea Free Trade Agreement (KORUS FTA). KORUS, like NAFTA, could similarly displace American jobs, EPI warns Perhaps the most drastic switch post-NAFTA has been in the two country's trade deficit. In 1993, before the signing of NAFTA, the U.S. held a $1.6 billion trade surplus over their neighbor to the south, which supported 29,400 jobs. By 1997, the tides had turned, and Mexico laid claim to a much larger surplus of $16.6 billion. As of 2010, it's not even close. Mexico's trade surplus now hovers around $97.2 billion. Jobs continue to be lost to NAFTA today. In the years 2007-2010, the U.S. economy has lost 116,400 as a result of the trade deficit created by NAFTA. And last year, the growth of Mexican auto exports to the United States alone created more Mexican jobs -- 30,400 -- than the entire U.S. auto industry. It's the U.S. manufacturing sector that has suffered most mightily from NAFTA, alone accounting for 60.8 percent -- 415,000 total -- of the jobs lost to the agreement. Specifically, those making computer of electronic parts have accounted for 22 percent of all job losses, and motor vehicle and parts workers accounted for 15 percent of job losses. Job losses haven't been limited to certain geographic regions, either, as all fifty states have lost jobs as a result. And while the states with the largest total number of job losses, California and Texas, do hug the southern border, it's actually manufacturing-heavy states to the north, such as Michigan, Indiana and Kentucky, that have lost the largest share of jobs to Mexico.

Achievements and Challenges

All of us seeking respite from the highly partisan, often surreal shouting matches over trade policy are deeply in debt to Hufbauer and Schott for this definitive, comprehensive assessment of the North American Free Trade Agreement's first decade. Nimbly dissecting virtually every numerical study of NAFTA, they reason that the trade accord has achieved its benchmark economic goals -- spurring competition in domestic markets, doubling merchandise trade, boosting direct investment -- and then proceed to deflate exaggerated claims that it has had major effects on either employment or wages. Recognizing that NAFTA's labor and environmental institutions and dispute-resolution mechanisms were badly shortchanged, the authors also recommend doubling the capital of the North American Development Bank and creating a unified (and fortified) NAFTA headquarters. Hufbauer and Schott toss out a basketful of market-based yet politically savvy proposals to deepen North American integration -- a common external tariff, Mexican nonvoting participation in Federal Reserve Board meetings, common visa standards for non-NAFTA visitors, an independent trilateral monitoring board to promote core labor standards, an annual environmental report card to spotlight glaring deficiencies -- but, bowing to vested interests and nationalist sentiments in all three member countries, stop short of the more ambitious "North American Community" vision. Every international economist will want a copy of this exemplary analysis of public policy on his or her bookshelf.


Role of Canada in NAFTA The North American Free Trade Agreement (NAFTA) revolutionized trade and investment in North America, helping to unlock our regions economic potential. Since it came into effect 15 years ago, North Americans have enjoyed an overall extended period of strong economic growth and rising prosperity. NAFTA has helped to stimulate economic growth and create higherpaying jobs across North America. It has also paved the way for greater market competition and enhanced choice and purchasing power for North American consumers, families, farmers, and businesses. Furthermore, NAFTA has provided North American businesses with better access to materials, technologies, investment capital, and talent available across North America. This has helped make our businesses more competitive, both within North America and around the world. With rapidly growing economies in Asia and South America challenging North Americas competitiveness, NAFTA remains key to sustained growth and prosperity in the region. NAFTA has proven that trade liberalization plays an important role in promoting transparency, economic growth, and legal certainty. In the face of increased global competition, Canada, the United States, and Mexico will work to strengthen the competitiveness of the North American region by continuing to pursue trade within the NAFTA region. The three countries will also continue to expand trade with other regions. Additionally, Canada, Mexico, and the United States share common challenges within North America that directly affect quality of life. At the 2009 North American

Leaders Summit, our three countries agreed to reiterate our commitment to reinvigorate our trading relationship and to ensure that the benefits of our economic relationship are widely shared and sustainable.

Since NAFTA came into effect, merchandise trade among the

NAFTA partners has more than tripled, reaching US$946.1 billion in 2008. Over that period, Canada-U.S. trade has nearly tripled, while trade between Mexico and the U.S. has more than quadrupled. [C$ figure = $1.0 trillion]

Today, the NAFTA partners exchange about US$2.6 billion in

merchandise on a daily basis with each other. Thats about US$108 million per hour. [C$ figures = $2.8 billion and $115 million]

Since NAFTA came into effect, the North American economy has

more than doubled in size. The combined gross domestic product (GDP) for Canada, the United States, and Mexico surpassed US$17 trillion in 2008, up from US$7.6 trillion in 1993. [C$ figures = $18.2 trillion and $9.8 trillion]

In 2008, Canada and the United States inward foreign direct

investment stocks from NAFTA partner countries reached US$469.8 billion. Meanwhile, Mexico has become one of the largest recipients of foreign direct investment among emerging markets, and received US$156 billion from its NAFTA partners between 1993 and 2008.

North American employment levels have climbed nearly 23% since

1993, representing a net gain of 39.7 million jobs.

Impact of NAFTA on Canada

Like the United States and Mexico, Canada, the leading exporter of goods to the United States, has experienced economic growth since NAFTA's implementation. If anything, Canada has seen the strongest gains, though again it is difficult to attribute direct causation, particularly given that Canada and the United States had a free trade deal that predated NAFTA. Canada's GDP has grown at a faster rate than either Mexico's or the United States' since 1994. Between 1994 and 2003, Canada's economy showed average annual growth rates of 3.6 percent, compared to 3.3 percent in the United States and 2.7 percent in Mexico. Canadian employment levels have also shown steady gains in recent years, with overall employment rising from 14.9 million to 15.7 million in the early 2000s. Even Canadian manufacturing employment held steady, though Schott and Hufbauer note that Canadian economists remain concerned about the "productivity gap" between the Canadian and U.S. economies. U.S. labor productivity has consistently outpaced Canada's, and the gap has broadened since NAFTA was put in place. One of NAFTA's biggest economic affects on U.S.-Canada trade has been to boost bilateral agricultural flows. Canada is the leading importer of U.S. agricultural products and U.S. agricultural exports to Canada roughly doubled between 1994 and 2003. The U.S. Department of Agriculture offers a sector-by-sector review (PDF) of U.S.-Canada trade since NAFTA's implementation, which shows broad increases in trade in several different sectors.

Employment in Canada by NAFTA (a) Job loss NAFTA's opponents attribute much of the displacement caused in the US labor market to the United States' growing trade deficitswith Mexico and Canada. According to the Economic Policy Institute, rise in the trade deficit with Mexico alone since NAFTA was enacted led to the net displacement of 682,900 U.S. jobs by 2010.[2] Critics see the argument of the proponents of NAFTA as being one-sided because they only take into consideration export-oriented job impact instead of looking at the trade balance, also known as net exports. They argue that increases in imports ultimately displaced the production of goods that would have been made domestically by workers within the United States. The export-oriented argument is also critiqued because of the discrepancy between domestically produced exports and exports produced in foreign countries. For example, many US exports are simply being shipped to Mexican maquiladores where they are assembled, and then shipped back to the U.S. as final products.[3] These are not products destined for consumption by Mexicans, yet they made up 61% of exports in 2002. However, only domestically produced exports are the ones that support U.S. labor. Therefore, the measure of net impact of trade should be calculated using only domestically produced exports as an indicator of job creation. (b) Job creation U.S. employment increased over the period of 1993-2007 from 110.8 million people to 137.6 million people.[9] Specifically within NAFTA's first five years of existence, 709,988 jobs (140,000 annually), were created

domestically. The mid to late nineties was a period of strong economic growth in the United States. Classical macroeconomic theory suggests that when a country is experiencing economic growth (i.e. GDP is increasing), then there will also be an increase in the participation of the labor force. Thus, because trade liberalization can sometimes contribute to increases in GDP, it can help to bring the rate of unemployment down in a country. The U.S. experienced a 48% increase in real GDP from 1993-2005. The unemployment rate over this period was an average of only 5.1%, compared to 7.1% from 1982-1993, before NAFTA was

implemented. Critics on NAFTA argue that the 1990s economic boom was driven by technological change, however, and that employment growth in the 1990s would have been even greater without NAFTA. Economic impact of NAFTA on Canada Canada has so far experienced significant benefit from:

U.S. investment in automotive production, Increases in oil exports to the U.S. and the rest of the world, Increases in shipment of beef, agricultural, wood and paper products

to the U.S.

Export of mineral and mining products, which have fared well

in U.S. markets. Canada has, however, experienced some losses in narrow sectors such as specialty steel production and processed foods due to U.S. imports.

Cities such as Windsor, Ontario, profited from being close to Detroit, where automotive parts and assembly facilities developed on both sides of

the border. The eastern and western parts of Canadabenefited from NAFTA re-export, as well as from increased traffic through their ports. U.S. investment provided higher-paying jobs in the automotive, agribusiness, energy, aerospace andtransportation sectors, among others. This added to the ranks of the Canadian middle class and increased the level of secondary education in the population. It also provided jobs for the wave of immigrants from India and Pakistan who are currently residing in Canada.

One of NAFTA's biggest economic affects on U.S.-Canada trade has been to boost bilateral agricultural flows. Canada is the leading importer of U.S. agricultural products and U.S. agricultural exports to Canada roughly doubled between 1994 and 2003. The U.S. Department of Agriculture offers a sector-by-sector review (PDF) of U.S.-Canada trade since NAFTA's implementation, which shows broad increases in trade in several different sectors. Benefits of NAFTA with respect to Canada NAFTA is the acronym that represents the North American Free Trade Agreement that exists between the three countries of North America: Canada, Mexico and the United States. NAFTA was ratified as legislation in the three involved countries by late 1993 and the agreement officially came into effect on January 1st of 1994. When NAFTA was officially ratified the agreement created the worlds largest free trade area and effectively linked 439 million people. NAFTA has also generated a connection between the three involved countries which has led to other benefits such as agreements being generated to regulate labour and the environment in North America.

Increasing Trade NAFTA is primarily an agreement designed to increase and ease trade between the involved countries. Since the signing of NAFTA in 1994, Canada has seen huge benefits with the increase in trade that has been generated. In 1993 before NAFTA came into effect trade between Canada, the United States and Mexico was 297 billion dollars per year; after NAFTA was ratified the benefits were immediate and continuous as by 2007 trade between the partners had tripled to 903 billion dollars per year. NAFTA also benefits Canadians as NAFTA eliminates the high Mexican tariffs that traditionally existed on agricultural exports. NAFTA also benefits Canadians as goods produced in Mexico can enter Canada and the United States duty free helping to lower costs. NAFTA has also benefited Canadians as through the agreement a greater variety of products is available in the Mexican market. Trade of commodities is not the only thing that has grown in response to NAFTA as Canada also has benefited from an increase of trade in services. Generating Jobs Throughout the countries involved in NAFTA since the document has come into effect it is recognized that the standards of living have steadily been rising, which can only be considered a benefit of the agreement. 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 due to trade is also a benefit as the activity helps

generate jobs. Canada also directly benefits from the agreement as one in five Canadian jobs are at least in part related to trade. Enhancing Investment NAFTA also benefits Canadians as it increases investment, particularly foreign investment from the other countries involved in the agreement. The protection of NAFTA also helps to attract investors as the agreement reduces some risk for foreign investors as they are granted the same protection as local or domestic investors. Also by creating the link between the three North American countries firms located in Canada, Mexico, or the United States are allowed to bid on government contracts which generates more opportunities and can help attract business. Agricultural Benefits to Canada While it is difficult to isolate the precise effects of any trade agreement on jobs and growth, it is clear that the North American Free Trade Agreement (NAFTA) has had a significant positive impact on the Canadian agricultural economy. Canada's agriculture and agri-food industry is largely export oriented and has benefited from the increased access to United States and Mexican markets. Since the NAFTA was approved in 1993, Canadian agricultural and agri-food exports to the United States and Mexico have increased by 95 percent, reaching $14.8 billion in 2000. In comparison, Canadian exports of agricultural products to non-NAFTAcountries grew by 45 percent during the same period.

The NAFTA, which created an impartial, rules-based system to resolve disputes between the partners, has also provided stability, predictability and clarity to the conduct of business within North America. Canada-U.S. Agricultural Trade (1993-2000) Two-way agricultural trade between Canada and the United States increased by 82 percent since 1993, reaching $25.1 billion in 2000. During the same period, Canadian exports of agricultural products to the United States have grown by 92 percent to reach $14.1 billion. Canada's agricultural trade surplus with the United States has more than tripled since 1993. The United States is Canada's largest export market, purchasing close to 61 percent of our agricultural and agri-food exports. Moreover, 67 percent of Canadian agricultural and agri-food exports to the United States are consumer oriented products. Canada's agriculture and agri-food industry has benefited from greater and more secure access to the U.S. market under theNAFTA.

Horticultural crops: volume exports of tomatoes increased twenty-

fold while exports of peppers and lettuce increased seven-fold, and exports of cucumbers increased six-fold.

Oilseeds products: soybean oil volume exports increased seven-fold,

exports of sunflower oil quadrupled, and canola oil exports increased by 44 percent.

Specialty crops: dried beans volume exports nearly tripled. Red meats: beef volume exports more than doubled while pork

exports increased by 87 percent.

Processed products: roasted coffee volume exports increased nearly

seventeen-fold, malt exports increased nearly five-fold, exports of frozen french fries increased four-fold, and pasta exports more than tripled. Canada-Mexico Agricultural Trade (1993-2000) Two-way agricultural trade between Canada and Mexico increased by 164 percent since 1993, reaching nearly $1.1 billion in 2000. Canadian agricultural and agri-food exports to Mexico nearly tripled, reaching $692 million last year. Canada's agricultural trade surplus with Mexico has increased nearly five-fold since 1993. The share of consumer oriented products in Canada's agricultural and agrifood exports to Mexico has grown from 12 percent in 1993 to 26 percent last year. Although Mexico currently purchases only three percent of Canada's agricultural and agri-food exports, it represents a fast-growing market for many products.

Grains and oilseeds: oats volume exports increased seven-fold,

canola exports more than tripled, and wheat exports increased by 65 percent.

Specialty crops: volume exports of dried beans increased seven-fold,

dried peas exports increased six-fold, and exports of lentils increased nearly five-fold.

Horticultural products: volume exports of frozen vegetables

increased by 78 percent.

Red meats: beef volume exports increased twenty-five-fold while

pork exports increased three-fold.

Processed products: volume exports of frozen french fries increased


Advantages of NAFTA
NAFTA created the worlds largest free trade area. It allows the 450 million people in the U.S., Canada and Mexico to export to each other at a lower cost. As a result, it is responsible for $1.6 trillion in goods and services annually. Estimates are that NAFTA increases the U.S. economy, as measured by GDP, by as much as .5% a year. (Source:

USTR, Quantification of NAFTA Benefits) First, it eliminatestariffs. This reduces inflation by decreasing the costs of imports. Second, NAFTA creates agreements on international rights for business investors. This reduces the cost of trade, which spurs investment and growth especially for small businesses. Third, NAFTA provides the ability for firms in member countries to bid on government contracts. Fourth, NAFTA also protects intellectual properties. Trade between the NAFTA signatories more than quadrupled, from $297 billion in 1993 to $1.6 trillion in 2009 (latest data available). Exports from the U.S. to Canada and Mexico grew from $142 billion to $452 billion in 2007, then declined to $397 billion in 2009, thanks to the 2008 financial crisis. Exports from Canada and Mexico to the U.S. increased from $151 billion to $568 billion in 2007, then down to $438 billion in 2009 Boosted U.S. Farm Exports: Agricultural exports to Canada and Mexico grew from 22% of total U.S. farm exports in 1993 to 30% in 2007. To put this into perspective, agricultural exports to Canada and Mexico were greater than exports to the next six largest markets combined. Exports to the two countries nearly

doubled, growing 156% compared to a 65% growth to the rest of the world. (Source: U.S. Foreign Agricultural Service, NAFTA) NAFTA increased farm exports because it eliminated high Mexican tariffs. Mexico is the top export destination for U.S.-grown beef, rice, soybean meal, corn sweeteners, apples and beans. It is the second largest export destination for corn, soybeans and oils. Reduced Oil and Grocery Prices: The U .S. imported $116.2 billion in oil from Mexico and Canada as shale oil (down from $157.8 billion in 2007). This also reduces U.S. reliance on oil imports from the Middle East and Venezuela. It is especially important now that the U.S. no longer imports oil from Iran. Why? Mexico is a friendly country, whereas Venezuela's president often criticizes the U.S. Both Venezuela and Iran have started selling oil in currencies other than the dollar, contributing to the decline in the dollar's value. Since NAFTA eliminates tariffs, oil prices are lower. The same is true for food imports, which totaled $29.8 billion in 2010 (up from $28.9 billion in 2009). Without NAFTA, prices for fresh vegetables, chocolate, fresh fruit (except bananas) and beef would be higher. (Source: USTR,NAFTA Imports) Created Trade Surplus in Services: More than 40% of U.S. GDP is services, such as financial services and health care. These aren't easily transported, so being able to

export them to nearby countries is important. NAFTA boosted U.S. service exports to Canada and Mexico from $25 billion in 1993 to $106.8 billion in 2007, which dropped to $63.5 billion in 2009 (latest data available). Imports of services from the two countries were only $35 billion. NAFTA eliminates trade barriers in nearly all service sectors, which are often highly regulated. NAFTA requires governments to publish all regulations, lowering hidden costs of doing business.


1. 2.

e nations - the progressive elimination of tariffs & trade barriers, Dispute resolution Commitment to intellectual property & environment legislation Mutual entry into governmental bidding & the financial and other service sector But on the other hand it is also responsible for causalities like loss of jobs, migration, rising level of inequality and many others.