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North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) is a freetrade agreement signed by Canada, Mexico and the United states, creating a trilateral trading block in North America. The agreement came into force on January 1, 1994. The agreement was negotiated by President George H. W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas. However, it was finalized by President Bill Clinton and Prime Minister Jean Chretian. The agreement was then ratified by each nation's legislative or parliamentary branch.

The implementation of NAFTA brought the immediate reduction of tariffs on Mexico's exports to the U.S. and U.S. exports to Mexico. It also replaced the Canada-US Free Trade Agreement (CUFTA) which had been in affect since 1989. At the time, trade between Canada and the U.S. was significantly duty-free. 

Since NAFTA, Mexican exports to the U.S. have grown over 36%, with electrical machinery, petroleum products, vehicles, nuclear reactors, and boilers comprising 70% of these exports. Canadian exports to the U.S. have grown 32.7%, with petroleum related products (25%), vehicles (20%) and nuclear reactors, boilers and machinery (7%) comprising the significany portions of exports. The U.S. trade imbalance has increased from -$51B in 2000 to -$80B in 2008.1

As well, NAFTA increased U.S. agricultural exports to Mexico, most notably corn and meat; although these changes happened almost a decade after NAFTA was signed.2  The United States has a comparative advantage over Mexico in agriculture because of better production methods and, as a consequence, NAFTA may have hurt Mexico's poor, rural, farming communities. However, agriculture composes a small portion of overall trade under NAFTA.

The 2008 U.S. Presidential election highlighted four main controversies that exist as a result of NAFTA in the United States: the outsourcing of U.S. jobs to Mexico, the loss of foreign direct investment (FDI) in the U.S., the loss of middle-class incomes for the average worker, and illegal migration from Mexico.2  While it is difficult to prove the validity of these claims, it can be proved that trade has significantly increased since NAFTA, that the US trade imbalance has significantly increased, and illegal migration of Mexican workers has increased.2

 

 

References:
1. Hartman, S. W. (2010) NAFTA, the Controversy. The International Trade Journal. December. p 5-34.
2. Free Trade Agreement Helped US Farmers. Retrieved from: http://newswise.com/articles/view/541349/

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