NAFTA

What is the North American Free Trade Agreement?

In January 1994, the United States, Mexico and Canada entered into the North American Free
Trade Agreement (NAFTA), creating the largest free trade area and richest market in the world.
The NAFTA is the most comprehensive regional trade agreement ever negotiated by the United
States and is scheduled to be fully implemented by the year 2008. In 1996, U.S. two-way trade in
goods under the NAFTA with Canada and Mexico stood at $420 billion--a 44 % increase since
the NAFTA was signed.
What are some of the key goals of the NAFTA?
to reduce barriers to trade
to increase cooperation for improving working conditions in North America
to create an expanded and safe market for goods and services produced in North America
to establish clear and mutually advantageous trade rules
to help develop and expand world trade and provide a catalyst to broader international
cooperation
Why should consumers care about the NAFTA?
U.S. consumers participate in international trade each day as they purchase goods and services
that cross international borders. Therefore, they are affected daily by what they pay for the
products and how safe they are.
Trade is considered "free" or "open" when goods and services can move into markets without
restrictions, and prices are determined by supply and demand. Nations sometimes erect barriers
to this free movement of goods and services, such as quotas limiting the quantity of products
imported, or non-tariff barriers, such as registration or labeling requirements, that create
obstacles to selling foreign goods. These barriers can significantly increase the cost of the
product.
What are the benefits of the NAFTA for U.S. consumers?
more free trade resulting in greater choices in goods and services
lower prices and improved quality products
stronger health and safety standards
improved economic stability in the U.S. marketplace
a marketplace that is increasingly driven more by supply and demand than by barriers to
commerce
What are the benefits of the NAFTA for U.S. b
more free trade resulting in greater choices in goods and services
lower prices and improved quality products
stronger health and safety standards
improved economic stability in the U.S. marketplace
a marketplace that is increasingly driven more by supply and demand than by barriers to
commerce
What are the benefits of the NAFTA for U.S. business?
larger North American market access
new export and investment opportunities
elimination of tariffs; Canadian and U.S. tariffs were eliminated on January 1, 1998;
Mexico will be duty free by the year 2008 for North American made products
creation of strong "rules of origin" for North American made products
effective procedures to resolve trade disputes
establishment of compatible standards of goods between the three countries
facilitation of cross-border movement of goods and services
What is the NAFTA's impact on U.S. jobs?
The NAFTA has created jobs for American workers by expanding access to U.S. goods and
services in the Mexican and Canadian markets. In 1996, jobs supported by the export of U.S.
goods to Mexico and Canada increased by an estimated 311,000 to 2.3 million from 1993 (pre-
NAFTA). In addition, export-supported jobs, which are in the higher productivity, export-
oriented sectors of the economy, pay 13% to 16% more than the average U.S. wage.
What are some of the industries that are experiencing significant benefits as a result of the
NAFTA?
Agricultural Trade: The United States is the world's largest and most competitive exporter of
agricultural commodities. The NAFTA has reinforced the trend toward greater integration of the
North American agricultural marketplace and a more productive and efficient American
agricultural sector. U.S. consumers are benefiting from more open access to wider sources of
supply. U.S. agricultural exports to North America have grown rapidly since the NAFTA went
into effect, and, if recent trends continue, could reach $30 billion per year by 2005--up from
$11.6 billion in 1996.
Automotive Industry: Prior to the NAFTA, U.S. motor vehicle exports to Mexico faced
restrictive trade balancing and local content requirements, as well as tariffs of 20 %. With the
reduction/elimination of these trade barriers, liberalized investment rules and preferential rules of
origin, U.S. parts and vehicle manufacturers have become more efficient and competitive in the
North American market. In 1996, the U.S. exported 51,000 new cars and 31,500 new trucks to
Mexico alone for a value of $1.2 billion.
Textiles and Apparel: The NAFTA has increased economic activity and enhanced export
prospects for textile and apparel producers in the United States. To be internationally competitive
in the global marketplace, U.S. producers of textiles and apparel have improved their
productivity and concentrated on specialized products. The NAFTA has enabled U.S. producers
to optimize production and manufacturing investment in North America, resulting in a shift of
production from the Far East to North America, strengthening the industry's worldwide position.
Textile and apparel trade among the three NAFTA partners has nearly doubled since the NAFTA
took effect, increasing from $6.4 billion in 1993 to $12.4 billion in 1996.
How does the NAFTA affect the environment?
North American consumers will benefit from various initiatives being undertaken by the
NAFTA partners to strengthen and protect the North American environment. The NAFTA
Commission for Environmental Cooperation (CEC) has deepened trilateral cooperation on a
broad range of environmental issues, including illegal trade in hazardous wastes, endangered
wildlife, and the elimination of certain toxic chemicals and pesticides. Through the CEC, Mexico
has agreed to join the United States and Canada in banning the pesticides DDT and chlordane,
ensuring that these long-lived toxic substances no longer cross our border. The United States and
Mexico have also launched a Border XXI program establishing five-year objectives for
achieving a clean border environment and a blueprint for meeting these objectives.

Conclusion
The North American Free Trade Agreement (NAFTA) will not be fully implemented until 2008.
However, it is evident that NAFTA has already proved its worth to the United States by playing
an important and vital role in increasing consumer choice, improving market access for U.S.
products, and expanding U.S. jobs supported by exports.