Nafta

N.A.F.T.A.

The North American Free Trade Agreement (NAFTA) took effect January 1, 1994. It is a trade agreement between all three of countries of North America, which are The United States, Canada, and Mexico. The Canadian Prime Minister, Brian Mulroney, the Mexican President, Carlos Salinas de Gortari, and former U.S. President George H. Bush spearheaded the agreement. Relationships between the countries were already on good terms, especially between The United States and Canada. Five years before NAFTA went into effect they signed the Canada-U.S. Free Trade Agreement that eliminated all tariffs. It was only time before a more integrated agreement was put into effect for all of North America. The geographic location and the already established trade of goods and services made NAFTA a logical decision.

Most trade agreements are created for the elimination of tariffs between the specified countries, but NAFTA is an exception. It covers market access, such as phasing out tariffs over a 15-year period and the rules of origin. The rule of origin states that goods and services must originate in one of the North American countries to receive access to the lower tariffs. NAFTA also covers trade rules, services, the removal of investment restrictions, and the protection of intellectual property like patents, copyrights, and trademarks. Lastly, a dispute settlement process was established, which is critical in solving problems between the countries before they cause serious problems.

NAFTA also had special provisions embedded into the agreement to please the strongly opinionated labor unions and environmentalists. Former President Bill Clinton implemented two side-treaties, The North American Agreement on Environmental Cooperation (NAAEC) and The North American Agreement on Labor Cooperation (NAALC). Many worried about the potential of the rise of unemployment in The United States and Canada because of Mexico’s lackadaisical regulations on labor and environmental issues. The aim of the NAAEC was to set environmental regulations to aid in the development and improvement of the environment. The goal of the NAALC was to improve the cooperation of trade unions and other organizations to improve working conditions and living standards.

Positives

Like any other decision, agreement, or compromise there are positives and negatives, NAFTA is not exempt as its issues spark heated debates. The greatest benefit of NAFTA is blatantly obvious; trade and investment have drastically increased since the implementation of the agreement. In fact, The United States is the greatest benefactor, trade between the countries are hitting record highs. Canada and Mexico are the #1 and #2 importers of U.S. goods and services. Also they are #2 and #4 on The United State’s largest exporters list. The trade between Canada and The United States is astounding; it’s the largest flow of goods and services in the world, over $1 billion a day in goods crosses the border, mostly from agricultural and automobile products.

Thousands of American jobs, as well as Mexican and Canadian, were created due to the increase in the amount of goods exported by each country. The increase of exports and the increase of jobs are positively correlated, as one goes up the other will follow and vise versa.

Mexico has also felt the effects of NAFTA. Mexico’s economy has grown significantly; it jumped from 15th to the 9th largest economy in the world, due mostly to the influx of foreign investment. U.S. companies invest nearly $12 billion a year in Mexico, rather than other countries like China or Vietnam. Improvements have also been made to the living and working conditions, education, and the legal systems throughout all three countries. Since NAFTA came into effect, Mexico’s per capita increased by 24% reaching