North American Free Trade Agreement

North American Free Trade Agreement

( NAFTA )
I. Scope
NAFTA Population: 387 million
15 Nation EU Population: 373 million
NAFTA GNP: $8 trillion
EUROPE GNP: $8 trillion
Size of Trade Relationships:
U.S./Canada: $406 billion
U.S./Mexico: $248 billion
Canada/Mexico: $ 20 billion
Top Ten 2000 U.S. Trading
Partners ($ billions)
Canada $176.4 $229.2 $405.6 -$52.8
Mexico 111.7 135.9 247.6 -24.2
Japan 65.3 146.5 211.8 -81.3
China 16.3 100.0 116.3 -83.8
Germany 29.3 558.7 88.0 -29.5
United Kingdom 41.5 43.5 85.0 -1.9
South Korea 27.9 40.3 68.2 -12.4
Taiwan 24.4 40.5 64.9 -16.1
France 21.0 29.0 50.0 -8.0
Singapore 17.4 19.6 37.0 -2.2
Country U.S. Exports U.S. Imports Total Surplus/
Deficit
Irwin/McGraw-Hill
2-2
Copyright2002 by The McGraw-Hill Companies, Inc. All rights reserved.
NAFTA

II. History
U.S./Canada Free Trade Agreement
signed on January 2, 1988
Impacts on the Agreement:
Elimination of duties
Direct investment in the other country made
easier
Easier to market services in the other country
Provides dispute resolution mechanism
USCFTA not without controversy
USCFTA consistent with GATT
NAFTA

III. General Reasons for Free Trade
Agreements
- 1. Limits on GATT
- 2. Allows for specialization in terms of
comparative advantage
- 3. Increases potential exports for all parties

IV. Enter Mexico (NAFTA)
Political Change
Skyrocketing Trade
NAFTA

V. Advantages of NAFTA for Mexico
In spite of being resource rich, Mexicos
population growing faster than the number of jobs.
Needs investment, technology, and exports to spur
the economy.

VI. Advantages of NAFTA to U.S.
Access to Mexican Labor and Markets
Note: all three nations need the agreement to
compete more effectively in world markets
NAFTA
VII. Primary Objections to NAFTA
- 1. Fears of Lost Jobs (U.S./Canada)

- 2. Exploitation of Mexican Labor

- 3. Environmental Laws

- 4. Fears of Loss of Cultural Identity
(Canada/Mexico)
What NAFTA Will Do

- 1. Help Open Mexican Market

- 2. Increase Trade

- 3. Lower Prices

- 4. More Competitive Industries (Globally)

What NAFTA Will Not Do

- 1. 50% N.A. Origin Needed to Qualify

- 2. Decrease Paperwork

- 3. Eliminate Technical Standards

- 4. Lead to Standardized Transportation
Classifications/Groups
- Group of 7 Industrialized
- NICs
- LDCs

Market Characteristics
- Purchasing Power Parities

Policy Toward Foreign Investment
-Varies by country