NAFTA

Aditya Govind
Deeksha
Deepika
 What is NAFTA?
• North American Free Trade Agreement is an
agreement signed by Canada, Mexico, and the
United States, creating a trilateral trade bloc in
North America.
• January 1, 1994
 Countries Involved:
Country Capital Currency Population
USA Washington, D.C United States Dollar 32.57 Cr
(USD)
Canada Ottawa Canadian Dollar 3.65 Cr
(CAD)
Mexico Mexico City Mexican Peso 12.92 Cr
(MXN)

1 USD

19.13 MXN 1.33 CAD

 Timeline

1984 1988 1990 1992 1993

 Why did it come to existence?
• Protect IPR (Industrial Espionage)- Establish
dispute-resolution mechanisms-implement
labor and environmental safeguards.
• Mexican tariffs on US imports- higher- US
tariffs on Mexican imports.
• Illegal Immigration.
 Objectives
• Eliminate barriers to trade in, and facilitate the cross-border
movement of, goods and services between the territories of the
parties.
• Promote conditions of fair competition in the free trade area.
• Increase substantially investment opportunities in the territories of
the parties.
• Provide adequate and effective protection and enforcement of
intellectual property rights in each party’s territory.
• Create effective procedures for the implementation and application
of this agreement, for its joint administration and for the resolution
of disputes.
• Establish a framework for further trilateral, regional and multilateral
cooperation to expand and enhance the benefits of this agreement.
NAFTA was designed to encourage economic growth and integration among the North
American countries, and was thought to actually stimulate job growth, boost the three
countries’ respective economies, and increase imports.
NAALC , NAAEC,NAICS & MFN
NAALC
• Improve working conditions
and living standards in the
three countries.
• Oversight mechanisms to
ensure that labor laws are
being enforced in all three
countries.
• Protection of migrant
workers and children and
equal pay for men and
women.
NAAEC
• Promote sustainable
development based on
cooperation and mutually
supportive environmental
and economic policies
• CEC- allows for complaints
to go directly to CEC.
NAICS
• 1997-as a business
classification system that
allows comparative analysis
of business statistics across
the three countries.
MFN
• Clause- played a large role
in NAFTA.
• NAFTA-co-signed
countries-MFN status-all
should be treated equally.
• Favoritism-local and foreign
investors.
 Let’s understand the concept:
• Automobile Industry.
• Allowed auto makers to keep costs down- cars
and auto parts could be traded for free.
• 62.5% of the parts were sourced from North
America-it would be tariff free.
• Else-2.5% tariff.
• NAFTA allowed the manufacturers to source cars
where the costs were lowest.
• Made in Mexico vs. Made in US
• Labor and parts- cheaper
 US Mexico Canada Germany

Japan
Mexico South Korea
• 75% of the cars sold in US meet these
standards.
• Toyota + Chrysler + General Motors + Ford
• 25% of the car have the 2.5% tariff on them.
• US produces more cars now than before
NAFTA-same is the case with Canada and
Mexico.
 Expectation vs. Reality
Expectation Reality
• Proponents
• Critics
 Impact on Economy
• Economic growth: From 1993 to 2015
Country GDP status
USA 39.3% - $51,638
Canada 40.3%- $50,001
Mexico 24.1%- $9,511

• In terms of balance of trade: Mexico had an

upper hand-sells $60 billion to $400 billion
• US- trade deficit- cars and auto parts- 3x-
$130B
 Winners and Losers
Auto Industry US Losers
Agricultural Exports Mexico, US, Canada Winners
FDI Canada, Mexico, US Winners

• Jobs lost in US = 350,000

•Agriculture exports:
• MEX- beef- 10x to US
•US- corn- 191x to MEX
•CAN- wheat- 3x- US & MEX

• FDI:
• US-MEX Investments in CAN- 3x
•US Investments in CAN- 5x
Summary
 NAFTA 2.0
• NAFTA- CAFTA- TPP
• Popularly being called Half a NAFTA.
• Replaced by USMCA
• 62.5% 75%
• 40%-45% of these parts- laborers earning
$16/hour.