INTERNATIONAL

TRADE LAW

North American Free Trade

Agreement (NAFTA)

SUBMITTED TO:

SUBMITTED BY:

MS. ALAMDEEP

AMIT GUPTA

UILS

BALLB 8TH SEM.

PU

ROLL NO- 11/12

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ACKNOWLEDGEMENT

I would like to thank my International Trade Law professor Ms. Alamdeep for
giving me the opportunity to make this interesting project. Her expert guidance
and motivation has helped me a lot in making this project.
I would also like to thank my family and friends for helping me and supporting
me in making this project. Making this project has been a learning experience
for me and it has helped me in gaining my knowledge about the subject and this
topic.

Amit Gupta

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CONTENTS

Introduction
History
NAFTA
Bibliography

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North American Free Trade

Agreement (NAFTA)
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The North American Free Trade Agreement (NAFTA) is an agreement

signed by Canada, Mexico, and the United States, creating a trilateral rulesbased trade bloc in North America. The agreement came into force on January
1, 1994. It superseded the CanadaUnited States Free Trade Agreement between
the U.S. and Canada.In 1994, the North American Free Trade Agreement
(NAFTA) came into effect, creating one of the worlds largest free trade zones
and laying the foundations for strong economic growth and rising prosperity for
Canada, the United States, and Mexico. Since then, NAFTA has demonstrated
how free trade increases wealth and competitiveness, delivering real benefits to
families, farmers, workers, manufacturers, and consumers.The North American
Free Trade Agreement (NAFTA) is a comprehensive agreement that sets the
rules for international trade and investment between Canada, the United States,
and Mexico. The Agreement is a complex and lengthy document that includes
eight sections, 22 chapters, and some 2,000 pages.

HISTORY- The impetus for NAFTA actually began with President Ronald
Reagan, who campaigned on a North American common market. In 1984,
Congress passed the Trade and Tariff Act. This is important because it gave the
President "fast-track" authority to negotiate free trade agreements, while only
allowing Congress the ability to approve or disapprove, not change negotiating
points. Canadian Prime Minister Mulroney agreed with Reagan to begin
negotiations for the Canada-U.S. Free Trade Agreement, which was signed in
1988, went into effect in 1989 and is now suspended since it's no longer needed.
Meanwhile, Mexican President Salinas and President Bush began negotiations
for a liberalized trade between the two countries.
Prior to NAFTA, Mexican tariffs on U.S. imports were 250% higher than U.S.
tariffs on Mexican imports. In 1991, Canada requested a trilateral agreement,
which then led to NAFTA. In 1993, concerns about liberalization of labour and
environmental regulations led to the adoption of two addendums.NAFTA was
signed by President George H.W. Bush, Mexican President Salinas, and
Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the
legislatures of the three countries in 1993. It was finally signed into law by
President Bill Clinton on December 8, 1993 and entered force January 1, 1994.
Although it was signed by President Bush, it was a priority of President
Clinton's, and its passage is considered one of his first successes.
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PURPOSE-

Article 102 of the NAFTA agreement outlines its

purpose:
Grant the signatories Most Favoured Nation status.
Eliminate barriers to trade and facilitate the cross-border movement of
goods and services.
Promote conditions of fair competition.
Increase investment opportunities.
Provide protection and enforcement of intellectual property rights.
Create procedures for the resolution of trade disputes.
Establish a framework for further trilateral, regional and multilateral
cooperation to expand the trade agreement's benefits.

IMPORTANT PROVISIONS:
Market Access for Goods
The elimination of duties on thousands of goods crossing borders within
North America.
Phased-in tariff reductions now complete and special rules for
agricultural, automotive, and textile and apparel products.
Important rights for NAFTA services providers and users across a broad
spectrum of sectors.
Special commitments regarding telecommunications and financial
services.
Formal dispute resolution processes that help resolve differences that
arise in the interpretation or application of NAFTAs rules.

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Protection for Foreign Investment

Commitment to treat each others investors and their investments in the
territory of the host NAFTA country no less favourably than their own
domestic investors.
Commitment to provide NAFTA investors with the best treatment given
to foreign investors from beyond North America.
A transparent and binding dispute resolution mechanism specially
designed to deal with investment.
Protection for Intellectual Property
Adequate and effective protection and enforcement of a broad range of
intellectual property rights (including through patents, trademarks,
copyrights, and industrial designs), while ensuring that the measures that
enforce these rights do not themselves become barriers to legitimate
trade.
Easier Access for Business Travelers
Easier access for business professionals in hundreds of different
professions so that they can travel for business throughout the continent.
Access to Government Procurement
Access to government procurement opportunities at the federal levels in
Canada, Mexico, and the United States.
Rules of Origin
NAFTA rules of origin are used to determine whether a good is eligible
for preferential treatment under NAFTA.
At various times since NAFTA came into effect, the partners have
implemented measures to liberalize or expand the list of products that
qualify for preferential treatment. Since 2005, for example, the NAFTA
partners have implemented two sets of changes to make it easier for
traders to qualify for duty-free treatment under NAFTA.

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Side Agreements
The NAFTA partners also negotiated two side agreements: the North
American Agreement on Environmental Cooperation and the North
American Agreement on Labour Cooperation.

FACTS ABOUT NAFTA:

Canada and the United States implemented a free trade pact in 1989. In 1994,
NAFTA broadened the free trade area to include Mexico.
NAFTA Economy: Today NAFTA covers a North American economy with a
combined output of US$17.0 trillion.
NAFTA Population: The NAFTA region is home to 444.1 million people, 33.3
million of whom live in Canada, 304.1 million in the United States, and 106.7
million in Mexico.
NAFTA Languages: English, Spanish, and French are languages widely spoken
in the NAFTA countries. However, many other languages are spoken across the
continent.
Canada: One in five jobs in Canada is in part linked to international trade, and
Canadas prosperity is built on its openness to international trade and
investment. As such, the North American continental partnership is without a
doubt an important competitive advantage for Canada. Canada is using this
continental platform as a way to help Canadian business embrace commercial
opportunities around the world.
The United States: The largest and most diversified economy in the world, the
United States is a market economy whose businesses are world leaders in the
manufacturing and high-tech sectors, especially computers, medical equipment,
and aerospace, and in services, including financial services and
telecommunications, and in agriculture.
Mexico: Trade liberalization has transformed and modernized Mexicos vibrant
economy by successfully boosting trade and investment flows. Within just a few
years, Mexicos exports have diversified from primarily oil to include an array
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of manufactured products, making Mexico one of the largest exporters in the

world.

DISPUTE SETTLEMENT:
The North American Free Trade Agreement (NAFTA) includes impartial, rulesbased dispute resolution mechanisms to provide the assurance of fairness and
predictability that North American businesses need to engage in commercial
exchanges. Under NAFTA, our businesses can trade and invest with the
knowledge that rules exist to ensure fair treatment and that procedures are in
place to settle disputes impartially, on the rare occasions when they occur.
Today, the vast majority of trade and investment among the NAFTA partners
takes place in accordance with the clear and well-established rules of NAFTA
and the World Trade Organization. While disputes rarely emerge, NAFTA
directs those concerned to try to resolve their differences through NAFTA
committees and working groups or through other consultations. If no mutually
acceptable solution is found, NAFTA also provides for specific formal
mechanisms as follows:
Chapter 19 on Anti-dumping and Countervailing Duties
Chapter 19 offers exporters and domestic producers an effective and
direct route to make their case and appeal the results of trade-remedy
investigations before an independent and objective binational panel. This
process is an alternative to judicial review of such decisions before
domestic courts. This mechanism has been effective in providing for the
efficient and impartial review of trade remedy determinations made by
the investigating authorities of all three NAFTA partners. To date, panels
have sustained some decisions made by domestic investigating
authorities, but have also remanded others for reconsideration.
The NAFTA Secretariat is responsible for the administration of the
Chapter 19 dispute settlement process.

Chapter 20 on General Dispute Settlement

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 Chapter 20 offers a three-step process for resolving disputes regarding the

implementation or interpretation of NAFTA provisions:
The first step is the consultation process where the disputing
parties formally discuss the disagreement.
If the first step does not resolve the dispute, ministers will try to
reach agreement at a Free Trade Commission meeting.
If the second step does not resolve the dispute, the complainant can
request that a panel be set up to review the dispute and issue a
binding decision.
2 The NAFTA Secretariat is responsible for the administration of the
Chapter 20 dispute settlement process.
3

Chapter 11 on foreign investment

Chapter 11 establishes a mechanism for the settlement of investment

disputes between investors and NAFTA partners. This process assures
both equal non-discriminatory treatment among NAFTA investors (in
accordance with the principle of international reciprocity) and due
process before an impartial tribunal.

ADVANTAGES OF NAFTA:
NAFTA created the worlds largest free trade area, which benefits the
450 million people within its borders. It created an economic powerhouse
of $20.08 trillion, as measured by Gross Domestic Product (GDP). That's
because it linked the economies of the United States ($17.3
trillion), Canada ($1.6 trillion) and Mexico ($2.2 trillion). This trade area
is greater than the economic output of the 28 countries in the
entire European Union.
NAFTA eliminates all tariffs between the three countries in January
2008. This reduces inflation by decreasing the costs of imports.
NAFTA creates agreements on international rights for business investors.
This reduces the cost of trade. That spurs investment and growth,
especially for small businesses.
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 Between 1993-2015, trade between the three members quadrupled, from

$297 billion to $1.14 trillion. This boosts economic growth, profits, and
jobs for all three countries. It also allows lower prices for consumers.
U.S. exports of goods grew from $142 billion to $517 billion, making
Canada ($280 billion) and Mexico ($236 billion) the top two U.S. export
markets in 2015. That means 34% of all U.S. exports of goods went to
these two countries alone. Imports from Canada ($295.2 billion) and
Mexico ($294.7 billion) increased from $151 billion in 1993 to $590
billion, or 26% of total U.S.goods imports.
U.S. farmers were helped by NAFTA. Food exports to Canada and
Mexico grew 156%, compared to an increase of 65% to the rest of the
world.
The U.S. imported $144.2 billion in oil from Mexico and Canada. Thanks
to greater U.S. shale oil production, this figure was down from $157.8
billion in 2007. Since NAFTA eliminates tariffs, oil prices are lower. This
also reduces U.S. reliance on oil imports from the Middle East and
Venezuela.
Since NAFTA was enacted, U.S. foreign direct investment (FDI) in
Canada and Mexico more than tripled to $452 billion in 2012. This helps
boost profits of U.S. businesses by giving them more opportunities to
develop, and markets to explore.
NAFTA reduces investors' risk by guaranteeing they will have the same
legal rights as local investors. Through NAFTA, investors can make legal
claims against the government if it nationalizes their industry or takes
their property by eminent domain.

DISADVANTAGES OF NAFTA:
U.S. Jobs Were Lost- Since labour is cheaper in Mexico, many
manufacturing industries moved part of their production from high-cost
U.S. states. Between 1994 and 2010, the U.S. trade deficits with Mexico
totaled $97.2 billion, displacing 682,900 U.S. jobs.
U.S. Wages Were Suppressed
Mexico's Farmers Were Put out of Business- Mexico lost 1.3 million
farm jobs. The 2002 Farm Bill subsidized U.S. agribusiness by as much
as 40% of net farm income. When NAFTA removed tariffs, corn and
other grains were exported to Mexico below cost. Rural Mexican farmers
could not compete. At the same time, Mexico reduced its subsidies to
farmers from 33.2% of total farm income in 1990 to 13.2% in 2001.

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Mexico's Environment Deteriorated- In response to NAFTA

competitive pressure, Mexico agribusiness used more fertilizers and other
chemicals, costing $36 billion per year in pollution. Rural farmers
expanded into more marginal land, resulting in deforestation at a rate of
630,000 hectares per year.

RESULTS OF NAFTA:
The North American Free Trade Agreement (NAFTA) revolutionized trade and
investment in North America, helping to unlock our regions economic
potential. Since it came into effect 15 years ago, North Americans have enjoyed
an overall extended period of strong economic growth and rising prosperity.
NAFTA has helped to stimulate economic growth and create higher-paying jobs
across North America. It has also paved the way for greater market competition
and enhanced choice and purchasing power for North American consumers,
families, farmers, and businesses.
Furthermore, NAFTA has provided North American businesses with better
access to materials, technologies, investment capital, and talent available across
North America. This has helped make our businesses more competitive, both
within North America and around the world. With rapidly growing economies in
Asia and South America challenging North Americas competitiveness, NAFTA
remains key to sustained growth and prosperity in the region.
Since NAFTA came into effect, merchandise trade among the NAFTA
partners has more than tripled, reaching US$946.1 billion in 2008. Over
that period, Canada-U.S. trade has nearly tripled, while trade between
Mexico and the U.S. has more than quadrupled. [C$ figure = $1.0
trillion]
Today, the NAFTA partners exchange about US$2.6 billion in
merchandise on a daily basis with each other. Thats about US$108
million per hour. [C$ figures = $2.8 billion and $115 million]
Since NAFTA came into effect, the North American economy has more
than doubled in size. The combined gross domestic product (GDP) for
Canada, the United States, and Mexico surpassed US$17 trillion in 2008,

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up from US$7.6 trillion in 1993. [C$ figures = $18.2 trillion and $9.8
trillion]
In 2008, Canada and the United States inward foreign direct investment
stocks from NAFTA partner countries reached US$469.8 billion.
Meanwhile, Mexico has become one of the largest recipients of foreign
direct investment among emerging markets, and received US$156 billion
from its NAFTA partners between 1993 and 2008.
North American employment levels have climbed nearly 23% since 1993,
representing a net gain of 39.7 million jobs.

BIBLIOGRAPHY
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www.naftanow.org
www.useconomy.about.com
www.sice.oas.org
www.mackinac.org
Hufbauer, Gary Clyde, NAFTA An Assessment, oxford
publication,2015.

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