What is the NAFTA?

The North American Free Trade Agreement (NAFTA) is a regional agreement between the
Government oI Canada, the Government oI the United Mexican States and the Government
oI the United States oI America to implement a Iree trade area.

Article 102 oI the NAFTA states that:

"|t|he objectives oI this Agreement, as elaborated more speciIically through its principles and
rules, including national treatment, most-Iavoured-nation treatment and transparency, are to:
a.eliminate barriers to trade in, and Iacilitate the cross-border movement oI goods and
services between the territories oI the Parties;
b.promote conditions oI Iair competition in the Iree trade area;
c.increase substantially investment opportunities in the territories oI the Parties;
d.provide adequate and eIIective protection and enIorcement oI intellectual property
rights in each Party's territory;
e.create eIIective procedures Ior the implementation and application oI this Agreement,
Ior its joint administration and Ior the resolution oI disputes; and
I.establish a Iramework Ior Iurther trilateral, regional and multilateral cooperation to
expand and enhance the beneIits oI this Agreement."
When Did the NAFTA enter into force?

The North American Free Trade Agreement (NAFTA) between Canada, the United States
and Mexico entered into Iorce on January 1, 1994.

Centres of NAFTA:
USA- technology and services
Canada- Mineral and Iorest products
Mexico- Labour and agriculture

enefits of NAFTA:
NAFTA, The North American Free Trade Agreement, came into Iorce on 1st Jan, 1994,
between the United States, Mexico, and Canada. This agreement created the largest Iree trade
area which is believed to have linked over 444 million people, who are producing over $17
trillion worth oI goods and services. Studies have shown that the NAFTA has resulted in the
increase oI US GDP by over .5 per annum. This is possible due to the elimination oI taxes
and the creation oI international rights Ior investors. It has also resulted in lesser business
costs and encouragement oI investment and growth oI small enterprises. This in turn has
reduced inIlation by reducing import costs. Now, letts take a look at the other major
beneIits oI this agreement.
1.Improved agricultural trade:
The two-way agricultural trade between the United States and Mexico increased 10.9 Irom
2003 to 2004. Similarly the agricultural trade agreement between the United States and
Canada increased 8 Irom 2003 to 2004. In 2004, the export oI various vital commodities
Irom US to both the countries set records.
.Encourages trade and development:
NAFTA has resulted in soaring trade partnerships between United States and its partners. In
Iact, as oI 2007, the goods and services trade with NAFTA was approximately $1.0 trillion,
exports were $452 billion, and imports were $568 billion. In 2008, the NAFTA partners were
the top two importers oI US products. US goods exports to NAFTA increased by 7.2 in
2008 as compared to 2007. The top categories oI exports included machinery, vehicle parts,
electrical machinery, mineral Iuel and oil, and plastics. Commercial private services also
showed an increase oI 13.2 in 2007 as compared to 2006.
3.Encourages specialization:
This agreement allows each oI the NAFTA partner countries to concentrate and specialize in
their own products and thereby become more eIIicient. For instance, in 2008, the NAFTA
partner countries were the third largest suppliers oI goods to the US. NAFTA accounted Ior
26.4 oI overall US imports and included products such as mineral Iuel and oil, vehicles,
electrical machinery, machinery, and other special returns. Agricultural products included
Iresh vegetables, snacks, live stock, processed Iruit and vegetables, wine and beer.
4.Prosperous and stable neighborhood:
US Ioreign direct investment in NAFTA countries was $348.7 billion in 2007, which was
11.3 more as compared to 2006. US direct investment was in the Iields oI manuIacturing,
Iinance, non-bank holding companies, and mining sectors. NAFTA partner countries direct
investment in the US was in the Iield oI Iinance, manuIacturing, and banking.
5.roader array of competitively priced goods:
For some commodities, competition oI imported products has increased. This is because oI
open marketing and bringing down oI trade barriers. Further, being one oI the strongest and
largest economies oI the NAFTA countries, US imports oI Canadian products have increased
considerably allowing US consumers a wide choice oI products at competitive rates. Also,
with NAFTA Mexicots tariIIs have reduced to about 2, making more than two-thirds oI
US exports to Mexico duty-Iree.
6.Enhanced job market:
The trade development due to the creation oI NAFTA has also resulted in a generation and
growth oI the job market. While on the one hand Mexico can make use oI advanced
technology to boost its industrial and economic development, US can avail oI comparatively
cheaper labor. Mexicots modernization would require the purchase oI US components
and technology, which in turn will encourage better economic integration. Also NAFTA has
resulted in opening up the Mexican market by encouraging zero tariIIs in both directions.
Thus, NAFTA created the world`s biggest Iree trade area and has led to the economic growth
oI all the partner countries by boosting their trade, agriculture, and employment
opportunities. This not only ensures a richer and more stable economy Ior each partner
country but also a more economically stable neighbor Ior these countries.


imitations of NAFTA:
1.FUE FOR PESO CRISIS: Critics blame NAFTA Ior much oI the crisis, saying that
euphoria over the pact led to bad lending decisions by Mexican banks and unsustainable
consumer spending. Furthermore, they say, concern about NAFTA`s approval caused
President Ernesto Zedillo`s administration to delay the devaluation, which would have been
less severe iI implemented earlier.
. ENEFITS MEXICO MORE THAN THE U.S. It has also been argued that the way
NAFTA was written beneIits Canada and Mexico more than the United States. For example,
Canada and especially Mexico have a longer time to change their tariIIs and restrictions than
the U.S. does. Plus, the mandatory restriction Ior the purchase oI only American-made goods
by certain U.S. Government agencies has been abolished in order to provide an atmosphere oI
competition Irom both Mexico and Canada in this market.
3. U.S. DEFICIT WITH TRADING PARTNERS One problem Irequently brought up is
that oI the American deIicit with it's trading partners. In Iact, the U.S. has its 4th highest
deIicit with Canada ($1.4 billion Ior July 1995, $18.10 billion Ior Iiscal year 1994) and 5th
highest with Mexico ($1.2 billion Ior July 1995, $8.21 billion Ior Iiscal year 1994).
4. OSS OF OW-WAGE AMERICAN 1OS TO MEXICO The biggest complaint
about NAFTA is how jobs, mainly blue-collar jobs, will all be lost to Mexico because labor is
so cheap down there. This above statement is at least halI true. What is true is that Mexican
labor is cheaper than American labor. The average U.S. worker makes $10.97/hour while the
average Mexican worker makes $1.85/hour. And in the FTZ (Free Trade Zone) in Northern
Mexico, the worker makes $0.75/hour.
United We Stand reports oI many prominent companies that are laying oII U.S. workers in
Iavor oI cheaper labor elsewhere, a direct cause oI NAFTA they say. An example (non-
inclusive) oI some oI these companies are: Scott Paper, Jolkswagen, Sansung, Continental
Apparel Manufacturing Co., Leviton, Matsushita (Panasonic), Chrysler, and Sara Lee. In
Iact, the greatest Mexican employer right now is General Motors (GM). And the greatest U.S.
employer right now is that oI temporary labor, which includes the migrant workers Irom
Mexico.

5. Environmental problems
6. TraIIic congestion and delays along the borders