North American Free Trade Agreement 

INTRODUCTION

NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada,

the U.S. and Mexico making it the world’s largest free trade area in terms of GDP. As of

January 1, 2008, all tariffs between the three countries have have been eliminated.

Between 1993-2007, trade tripled from $297 billion to $930 billion.

The North American Free Trade Agreement or NAFTA , French is an agreement

signed by the governments of the United States, Canada, andMexico creating a

trilateral trade bloc in North America. The agreement came into force on January 1,

1994. It superseded the Canada-United States Free Trade Agreement between the U.S.

and Canada. In terms of combined purchasing power parity GDP of its members, as of

2007 the trade block is the largest in the world and second largest by nominal GDP

comparison.

The North American Free Trade Agreement (NAFTA) has two supplements, the North

American Agreement on Environmental Cooperation (NAAEC) and the North American

Agreement on Labor Cooperation (NAALC).

NAFTA's naming

American intellectual Noam Chomsky has argued that the only true words in the phrase

"North American Free Trade Agreement" seem to be "North America", as what is called

trade is in reality mostly restricted intra-corporate transfers of products and services.

Agreement is lacking as NAFTA was passed with a lack of democratic oversight

protocols and widespread public opposition. 

Adam Smith, states in The Wealth of Nations that free trade includes the labor

component as a factor of production:

"By obstructing the free circulation of labour and stock both from employment to employment, and

from place to place, occasions in some cases a very inconvenient inequality in the whole of the

advantages and disadvantages of their different employments."

Within NAFTA official law and agreements the movement of labor is temporary and

very restrictive, especially for unskilled workers.Mexican (legal and illegal) migration to

the USA is surging, but not due to NAFTA provisions. NAFTA provisions for freedom of

movement of workers are very restrictive compared to one of the economic freedoms of

the European Union, the freedom of movement for workers.

1 | P a g e

North American Free Trade Agreement 

When Was NAFTA Started?

NAFTA was signed by U.S. 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. The U.S. House approved it by 234 to 200 on November

17 and the Senate by 60 to 38 on November 20. It was signed into law by President Bill

Clinton on December 8, 1993 and entered force January 1,1994. Although it was started

by President Bush, it was a priority of President Clinton's, and its passage is considered

one of his first successes. (Source: History.com, NAFTA Signed into Law, December 8,

1993.

How Was NAFTA Started?

The impetus for NAFTA actually began with President Ronald Regan, 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 while only allowing Congress the ability to approve or

disapprove, not change negotiating points. Canadian Prime Minister Mulroney agrees

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 due to NAFTA.

(Source: NaFina, NAFTA Timeline)

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

requests a trilateral agreement, which then led to NAFTA. In 1993, concerns about

liberalization of labor and environmental regulations led to the adoption of two

addendums to NAFTA.

2 | P a g e

North American Free Trade Agreement 

Why Was NAFTA Formed?

Article 102 of the NAFTA agreement outlines its purpose:

Grant the signatories Most Favored 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 NAFTA's benefits.

3 | P a g e

North American Free Trade Agreement 

Background

In 1988 Canada and the United States signed the Canada-United States Free Trade

Agreement. The American government then entered into negotiations with the Mexican

government for a similar treaty, and Canada asked to join the negotiations in order to

preserve its perceived gains under the 1988 deal. The international climate at the time

favoured expanding trade blocs, and the Maastricht Treaty which created theEuropean

Union was signed in 1992.

Following diplomatic negotiations dating back to 1991 between the three nations, the

leaders met in San Antonio, Texas, on December 17, 1992, to sign NAFTA. U.S.

President George H.W. Bush, Canadian Prime Minister Brian Mulroney and Mexican

President Carlos Salinas, each responsible for spearheading and promoting the

agreement, ceremonially signed it. The agreement then needed to be ratified by each

nation's legislative or parliamentary branch.

Before the negotiations were finalized, Bill Clinton came into office in the U.S. and Kim

Campbell in Canada, and before the agreement became law, Jean Chrétien had taken

office in Canada.

The proposed Canada-U.S.trade agreement had been extremely controversial and

divisive in Canada, and the 1988 Canadian election was fought almost exclusively on

that issue. In that election more Canadians voted for anti-free trade parties

(the Liberals and the New Democrats) but more seats in parliament were won by the

pro-free trade Progressive Conservatives (PCs). Mulroney and the PCs had

a parliamentary majority and were able to easily pass the Canada-U.S. FTA and NAFTA

bills. However Mulroney himself had become deeply unpopular and resigned on June

25, 1993. He was replaced as Conservative leader and prime minister by Kim Campbell,

who then led the PC party into the 1993 election where they were decimated by the

Liberals under Jean Chrétien. Chrétien had campaigned on a promise to renegotiate or

abrogate NAFTA, but instead negotiated the two supplemental agreements with the new

U.S. Democratic president, and ideological ally, Bill Clinton.

4 | P a g e

North American Free Trade Agreement 

Facts About NAFTA

1. History of NAFTA

NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada,

the U.S. and Mexico making it the world’s largest free trade area in terms of GDP. Three

U.S. Presidents were involved in creating it over a decade. Find out how it was created,

what its purpose was and how large it is today.

2. Advantages of NAFTA

NAFTA created the world’s largest free trade area, linking 439 million people and

producing $15.3 trillion in goods and services annually. Estimates are that NAFTA will

increase U.S. GDP by between .1% - .5%. Trade between the NAFTA signatories

tripled, from $297 billion in 1993 to $903 billion in 2007. Find out what industries

benefited, and how NAFTA specifically supported this increase in trade.

NAFTA created the world’s largest free trade area, linking 439 million people and

producing $15.3 trillion in goods and services annually. Estimates are that NAFTA

increases U.S. GDP by as much as .5% a year.

That's because its elimination of tariffs and agreements on international rights for

business investors increases trade and capital, spurring business growth. Elimination of

tariffs also reduces inflation, by decreasing costs of imports.

Increase in Trade:

Trade between the NAFTA signatories tripled, from $297 billion in 1993 to $903 billion in

2007. Specifically,U.S. goods exports to Canada and Mexico grew 157%, from $142

billion to $364.6 billion.Exports from Canada and Mexico to the U.S. grew 231%, from

$151 billion in to $501 billion.NAFTA provides the ability for firms in member countries to

bid on government contracts. It also protect intellectual properties.

5 | P a g e

North American Free Trade Agreement 

Increase in U.S. Agricultural Exports:

NAFTA is especially helpful for agricultural exports because it reduces high Mexican

tariffs. Mexico is the top export destination for beef, rice, soybean meal, corn

sweeteners, apples and beans. It is the second largest for corn, soybeans and oils. As a

result of NAFTA, the percent of U.S. agricultural exports to Canada and Mexico has

grown from 22% in 1993 to 30% in 2007. (Source: USTR, NAFTA Facts, March 2008)

Increase in Trade of Services:

More than 40% of U.S. GDP is services, including financial services and health care.

These aren't as easily transported as are goods, so being able to expand services to

nearby countries is important. Thanks to NAFTA, U.S. services exports to Canada and

Mexico grew 125%, from $25 billion to $62 billion in 2006. Services exports from Canada

and Mexico grew to $37 billion.NAFTA eliminates trade barriers in nearly all service

sectors. Service industries are often highly regulated, and the regulations aren't always

apparent. NAFTA requires authorities to use open administrative procedures and publish

all regulations.

Increase in Foreign Direct Investment:

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico

tripled to $331 billion (as of 2006, latest data available). Canadian and Mexican FDI in

the U.S. was $165 billion.NAFTA reduces risk for investors by guaranteeing they will

have the same legal rights as local investors. It also guarantees they will receive fair

market value for their investments in case the government decides to nationalize the

industry or take the property by eminent domain. NAFTA provides a legal mechanism for

investors to make claims against a government, if needed.

6 | P a g e

North American Free Trade Agreement 

3. Disadvantages of NAFTA

NAFTA has been criticized for both displacing American workers and decreasing wage

levels for those that remain. Mexican workers have also suffered, as have Mexican

farmers and its environment. Find out the facts behind these accusations, and how

NAFTA contributed to these problems.

NAFTA has many disadvantages. NAFTA allowed U.S. manufacturers to move jobs to

lower-cost Mexico. Those manufacturers that remained had to decrease wages to

compete.

Many of Mexico's farmers were put out of business by U.S.-subsidized farm products.

NAFTA provisions for Mexican labor and environmental protection were not strong

enough, allowing for exploitation.

Loss of U.S. Jobs:

Since the cost of labor is cheaper in Mexico, many manufacturing industries moved part

of their production from high-cost U.S. states. Between 1994 and 2002, the U.S. lost 1.7

million jobs, gaining only 794,00, for a net loss of 879,000 jobs. Most of these jobs(78%)

were in manufacturing. States hit hard included California, New York, Michigan and

Texas. These states had high concentrations of the industries that moved plants to

Mexico. These industries included motor vehicles, textiles, computers, and electrical

appliances. (Source: Economic Policy Institute, The High Cost of Free Trade, November

17, 2003)

Lower U.S. Wages:

Employers in industries that could move to Mexico used that as a threat during union

organizing drives, thus suppressing wage growth. Between 1993 and 1995, 50% of all

companies used the threat; by 1999, that rate had grown to 65%.

Mexico's Farmers Are Being Put Out of Business:

Thanks to the 2002 Farm Bill, U.S. agribusiness is heavily subsidized - as much as 40%

of net farm income. As tariffs are removed, corn and other food is exported to Mexico

below cost. This benefits consumers, who pay less for food, but makes it impossible for

rural Mexican farmers to compete. In contrast, between 1990-2001, Mexico decreased

its subsidies to farmers from 33.2% to 13.2% of total farm income. Most of those

subsidies go to Mexico's large farms. (Source: International Forum on Globalization,

7 | P a g e

North American Free Trade Agreement 

Exposing the Myth of Free Trade, February 25, 2003; The Economist, Tariffs and

Tortillas, January 24, 2008)

Maquiladora Workers Are Exploited:

NAFTA caused an increase of the maquiladora program, in which U.S. owned

companies employ Mexican workers near the border to cheaply assemble products for

"export" to the U.S. This now comprises 30% of Mexico's labor force. These workers

have "no labor rights or health protections, workdays stretch out 12 hours or more, and if

you are a woman, you could be forced to take a pregnancy test when applying for a job,"

according to Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA,

April 20, 2001)

Degradation of Mexico's Environment Has Increased:

In response to NAFTA competitive pressure, Mexico agribusiness has increased its use

of fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers

have expanded into more marginal land, resulting in deforestation at a rate of 630,000

hectares per year.

4. U.S. Regional Trade Agreements

How does NAFTA fit within the context of other U.S. regional trade agreements, such as

CAFTA, FTAA, and MEFTI?

8 | P a g e

North American Free Trade Agreement 

What Are Exchange Rates?

The dollar's exchange rate tells you how much a dollar is worth in a foreign currency,

and vice versa. For example, on March 3, 2008, a dollar was worth $.98 Canadian

dollars, 7.01 Chinese yuan, and 103.57 Japanese yen. The Euro is normally quoted in

terms of its dollar value, for some reason, so one Euro was worth $1.52.

Provisions

The goal of NAFTA was to eliminate monkeys of trade and investment between the

USA, Canada and Mexico. The implementation of NAFTA on January 1, 1994, brought

the immediate elimination of tariffs on more than one half of US imports from Mexico and

more than one third of US exports to Mexico. Within 10 years of the implementation of

the agreement all US-Mexico tariffs would be eliminated except for some US agricultural

exports to Mexico that were to be phased out in 15 years. Most US-Canada trade was

already duty free. NAFTA also seeks to eliminate non-tariff trade barriers.

9 | P a g e

North American Free Trade Agreement 

NAFTA or North American Free Trade Agreement

NAFTA covers Canada, the U.S. and Mexico making it the world's largest free trade

area. By 2008 almost all tariffs will have been eliminated. From 1993 (the initiation of

NAFTA) to 2005, trade increased from $297 billion to $810 billion.

The North America Free Trade Agreement, also known as NAFTA, is a trade agreement between the United States, Canada, and Mexico. NAFTA eliminated the majority of tariffs on products traded among the United States, Canada, and Mexico, and gradually phased out other tariffs over a 15-year period. The treaty also protects intellectual property rights (patents, copyrights, and trademarks), and outlines the removal of investment restrictions among the three countries. There have been positive and negative outcomes from the NAFTA agreement. Some argue that NAFTA has been positive for Mexico, which has seen its poverty rates fall and real income rise, even after accounting for the 1994–1995 economic crisis. Others argue that NAFTA has been beneficial to business owners and elites in all three countries, but has had negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness, and negative impacts on US workers in manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA has contributed to the rising levels of inequality in both the U.S. and Mexico. Some economists believe that NAFTA has not been enough to produce an economic convergence, nor to substantially reduce poverty rates. Some have suggested that in order to fully benefit from the agreement, Mexico must invest more in education and promote innovation in infrastructure and

10 | P a g e

North American Free Trade Agreement 

agriculture. Overall, NAFTA has not caused any trade diversion aside from the textiles and apparel industry.

TIMELINE:1988: Canada and the US signed the Canada-U.S. Free Trade Agreement.January 1, 1994: NAFTA was made as an expansion on the earlier US-Canada trade agreement.

2001: After the attacks on September 11, the United States signed the Security and Prosperity Partnership of North America.2001: Mexico’s percentage of exports ousted its percentage of imports.

2006: Foreign officials were admitted into the US because of the NAFTA agreement. 2006: Canadian Government estimates that 24,830 US citizens and 15,219 Mexican citizens were present in Canada as "foreign workers".

11 | P a g e

North American Free Trade Agreement 

Effects

NAFTA's effects, both positive and negative, have been quantified by several

economists, whose findings have been reported in publications such as the World

Bank's Lessons from NAFTA for Latin America and the Caribbean NAFTA's Impact on

North America, and NAFTA Revisited by the Institute for International Economics. Some

argue that NAFTA has been positive for Mexico, which has seen itspoverty rates fall and

real income rise (in the form of lower prices, especially food), even after accounting for

the 1994–1995 economic crisis. Others argue that NAFTA has been beneficial to

business owners and elites in all three countries, but has had negative impacts on

farmers in Mexico who saw food prices fall based on cheap imports from

U.S. agribusiness, and negative impacts on U.S. workers in manufacturing and

assembly industries who lost jobs. Critics also argue that NAFTA has contributed to the

rising levels of inequality in both the U.S. and Mexico. Some economists believe that

NAFTA has not been enough (or worked fast enough) to produce an economic

convergence, nor to substantially reduce poverty rates. Some have suggested that in

order to fully benefit from the agreement, Mexico must invest more in education and

promote innovation in infrastructure and agriculture.

12 | P a g e

North American Free Trade Agreement 

Trade

According to Issac (2005), overall, NAFTA has not caused trade diversion, aside from a

few industries such as textiles and apparel, in whichrules of origin negotiated in the

agreement were specifically designed to make U.S. firms prefer Mexican manufacturers.

The World Bank also showed that the combined percentage growth of NAFTA imports

was accompanied by an almost similar increase of non-NAFTA exports.

Industry

Maquiladoras (Mexican factories which take in imported raw materials and produce

goods for export) have become the landmark of trade in Mexico. These are plants that

moved to this region from the United States, hence the debate over the loss of American

jobs. Hufbauer's (2005) book shows that income in the maquiladora sector has

increased 15.5% since the implementation of NAFTA in 1994. Other sectors now benefit

from the free trade agreement, and the share of exports from non-border states has

increased in the last five years while the share of exports from maquiladora-border

states has decreased. This has allowed for the rapid growth of non-border metropolitan

areas, such as Toluca, Leónand Puebla; all three larger in population

than Tijuana, Ciudad Juárez, and Reynosa. The main non-maquiladora industry that has

suffered from NAFTA is the automobile industry.

13 | P a g e

North American Free Trade Agreement 

Environment

Securing U.S. congressional approval for NAFTA would have been impossible without

addressing public concerns about NAFTA’s environmental impact. The Clinton

administration negotiated a side agreement on the environment with Canada and

Mexico, the North American Agreement on Environmental Cooperation (NAAEC), which

led to the creation of the Commission for Environmental Cooperation (CEC) in 1994. To

alleviate concerns that NAFTA, the first regional trade agreement between a developing

country and two developed countries, would have negative environmental impacts, the

CEC was given a mandate to conduct ongoing ex post environmental assessment of

NAFTA.

In response to this mandate, the CEC created a framework for conducting environmental

analysis of NAFTA, one of the first ex post frameworks for the environmental

assessment of trade liberalization. The framework was designed to produce a focused

and systematic body of evidence with respect to the initial hypotheses about NAFTA and

the environment, such as the concern that NAFTA would create a “race to the bottom” in

environmental regulation among the three countries, or the hope that NAFTA would

pressure governments to increase their environmental protection mechanisms. The CEC

has held four symposia using this framework to evaluate the environmental impacts of

NAFTA and has commissioned 47 papers on this subject. In keeping with the CEC’s

overall strategy of transparency and public involvement, the CEC commissioned these

papers from leading independent experts.

Overall, none of the initial hypotheses was confirmed. NAFTA did not inherently present

a systemic threat to the North American environment, as was originally feared, but

NAFTA-related environmental threats instead occurred in specific areas where

government environmental policy, infrastructure, or mechanisms, were unprepared for

the increasing scale of production under trade liberalization. In some cases,

environmental policy was neglected in the wake of trade liberalization; in other cases,

NAFTA's measures for investment protection, such as Chapter 11, and measures

against non-tariff trade barriers, threatened to discourage more vigorous environmental

policy.[16] The most serious overall increases in pollution due to NAFTA were found in the

base metals sector, the Mexican petroleum sector, and the transportation equipment

sector in the United States and Mexico, but not in Canada.

14 | P a g e

North American Free Trade Agreement 

Agriculture

From the earliest negotiation, agriculture was (and still remains) a controversial topic

within NAFTA, as it has been with almost all free trade agreements that have been

signed within the WTO framework. Agriculture is the only section that was not negotiated

trilaterally; instead, three separate agreements were signed between each pair of

parties. The Canada–U.S. agreement contains significant restrictions and tariff quotas

on agricultural products (mainly sugar, dairy, and poultry products), whereas the

Mexico–U.S. pact allows for a wider liberalization within a framework of phase-out

periods (it was the first North–South FTA on agriculture to be signed).

The overall effect of the Mexico–U.S. agricultural agreement is a matter of dispute.

Mexico did not invest in the infrastructure necessary for competition, such as efficient

railroads and highways, creating more difficult living conditions for the country's poor.

Still, the causes of rural poverty cannot be directly attributed to NAFTA; in fact, Mexico's

agricultural exports increased 9.4 percent annually between 1994 and 2001, while

imports increased by only 6.9 percent a year during the same period.

Production of corn in Mexico has increased since NAFTA's implementation. However,

internal corn demand has increased beyond Mexico's sufficiency, and imports have

become necessary, far beyond the quotas Mexico had originally negotiated. Zahniser &

Coyle have also pointed out that corn prices in Mexico, adjusted for international prices,

have drastically decreased, yet through a program of subsidies expanded by former

president Vicente Fox, production has remained stable since 2000.

The logical result of a lower commodity price is that more use of it is made downstream.

Unfortunately, many of the same rural people who would have been likely to produce

higher-margin value-added products in Mexico have instead emigrated. The rise in corn

prices due to increased ethanol demand may improve the situation of corn farmers in

Mexico.

In a study published in the August 2008 issue of the American Journal of Agricultural

Economics, NAFTA has increased U.S. agricultural exports to Mexico and Canada even

though most of this increase occurred a decade after its ratification. The study focused

on the effects that gradual "phase-in" periods in regional trade agreements, including

NAFTA, have on trade flows. Most of the increase in members’ agricultural trade, which

was only recently brought under the purview of the World Trade Organization, was due

to very high trade barriers before NAFTA or other regional trade agreements.

15 | P a g e

North American Free Trade Agreement 

Mobility of persons

According to the Department of Homeland Security Yearbook of Immigration Statistics,

during fiscal year 2006 (i.e., October 2005 through September 2006), 74,098 foreign

professionals (64,633 Canadians and 9,247 Mexicans) were admitted into the United

States for temporary employment under NAFTA (i.e., in the TN status). Additionally,

17,321 of their family members (13,136 Canadians, 2,904 Mexicans, as well as a

number of third-country nationals married to Canadians and Mexicans) entered the U.S.

in the treaty national's dependent (TD) status. [22]Because DHS counts the number of the

new I-94 arrival records filled at the border, and the TN-1 admission is valid for one year,

the number of non-immigrants in TN status present in the U.S. at the end of the fiscal

year is approximately equal to the number of admissions during the year. (A discrepancy

may be caused by some TN entrants leaving the country or changing status before their

one-year admission period expired, while other immigrants admitted earlier may change

their status to TN or TD, or extend earlier granted TN status).

Canadian authorities estimated that, as of December 1, 2006, the total of 24,830 U.S.

citizens and 15,219 Mexican citizens were present in Canada as "foreign workers".

These numbers include both entrants under the NAFTA agreement and those who have

entered under other provisions of the Canadian immigration law. New entries of foreign

workers in 2006 were 16,841 (U.S. citizens) and 13,933 (Mexicans).

16 | P a g e

North American Free Trade Agreement 

Criticism and controversies

Canadian disputes

There is much concern in Canada over the provision that if something is sold even once

as a commodity, the government cannot stop its sale in the future. [25] This applies to the

water from Canada's lakes and rivers, fueling fears over the possible destruction of

Canadian ecosystems and water supply.

In 1999, Sun Belt Water Inc., a company out of Santa Barbara, California, filed an

Arbitration Claim under Chapter 11 of the NAFTA claiming $105 million as a result of

Canada's prohibition on the export of bulk water by marine tanker, a move that

destroyed the Sun Belt business venture. Sun Belt maintains a website where many

documents concerning the Arbitration are posted www.sunbeltwater.com. The claim sent

shock waves through Canadian governments that scrambled to update water legislation

and remains unresolved.

Other fears come from the effects NAFTA has had on Canadian lawmaking. In 1996, the

gasoline additiveMMT was brought into Canada by an American company. At the time,

the Canadian federal government banned the importation of the additive. The American

company brought a claim under NAFTA Chapter 11 seeking US$201 million, and by

Canadian provinces under the Agreement on Internal Trade ("AIT"). The American

company argued that their additive had not been conclusively linked to any health

dangers, and that the prohibition was damaging to their company. Following a finding

that the ban was a violation of the AIT, the Canadian federal government repealed the

ban and settled with the American company for US$13 million. Studies by Health and

Welfare Canada (now Health Canada) on the health effects of MMT in fuel found no

significant health effects associated with exposure to these exhaust emissions. Other

Canadian researchers and the U.S. Environmental Protection Agency disagree with

Health Canada, and cite studies that include possible nerve damage.

The United States and Canada had been arguing for years over the United States'

decision to impose a 27 percent duty on Canadian softwood lumber imports, until new

Canadian Prime Minister Stephen Harpercompromised with the United States and

reached a settlement on July 1, 2006. The settlement has not yet been ratified by either

country, in part due to domestic opposition in Canada.

17 | P a g e

North American Free Trade Agreement 

Canada had filed numerous motions to have the duty eliminated and the collected duties

returned to Canada. After the United States lost an appeal from a NAFTA panel, it

responded by saying "We are, of course, disappointed with the [NAFTA panel's]

decision, but it will have no impact on the anti-dumping andcountervailing duty orders."

(Nick Lifton, spokesman for U.S. Trade Representative Rob Portman) On July 21, 2006,

the U.S. Court of International Trade found that imposition of the duties was contrary to

U.S. law.

Canadian government challenged on change in Income trust taxation

On October 30, 2007, American citizens Marvin and Elaine Gottlieb filed a Notice of

Intent to Submit a Claim to Arbitration under NAFTA. The couple claims thousands of

U.S. investors lost a total of $5 billion dollars in the fall-out from the Conservative

Government's decision the previous year to change the tax rate on income trusts in the

energy sector. On 29 April 2009, a determination was made that this change in tax law

was not expropriation. 

U.S. deindustrialization

An increase in domestic manufacturing output and a proportionally greater domestic

investment in manufacturing does not necessarily mean an increase in domestic

manufacturing jobs; this increase may simply reflect greater automation and higher

productivity. Although the U.S. total civilian employment may have grown by almost 15

million in between 1993 and 2001, manufacturing jobs only increased by 476,000 in the

same time period. Furthermore from 1994 to 2007, net manufacturing employment has

declined by 3,654,000, and during this period several other free trade agreements have

been concluded or expanded.

18 | P a g e

North American Free Trade Agreement 

Impact on Mexican farmers

Critics of NAFTA cite negative affects on Mexico's corn farmers

In 2000, U.S. government subsidies to the corn sector totaled $10.1 billion, a figure ten

times greater than the total Mexican agricultural budget that year.These subsidies have

lead to charges of de factodumping which jeopardizes Mexican farms and the country's

food self-sufficiency.

Other studies reject NAFTA as the force responsible for depressing the incomes of poor

corn farmers, citing the trend's existence more than a decade before NAFTA's existence,

an increase in maize production after NAFTA went into effect in 1994, and the lack of a

measurable impact on the price of Mexican corn due to subsidized corn coming into

Mexico from the United States, though they agree that the abolition of U.S. agricultural

subsidies would benefit Mexican farmers.According to Graham Purchase in Anarchism

and Environmental Survival, NAFTA could cause "the destruction of the ejidos (peasant

cooperative village holdings) by corporate interests, and threatens to completely reverse

the gains made by rural peoples in the Mexican Revolution." 

19 | P a g e

North American Free Trade Agreement 

Certificate of Origin of NAFTA

Canada, Mexico and the United States established a uniform Certificate of Origin to certify that goods imported into their territories qualify for the preferential tariff treatment accorded by the NAFTA. Only importers who possess a valid Certificate of Origin may claim preferential tariff treatment for originating goods.

Language

A uniform Certificate of Origin is used in all three countries and is printed in English, French or Spanish. The Certificate shall be completed in the language of the country of export or the language of the importing country, at the exporter's discretion. Importers shall submit a translation of the Certificate to their own customs administration when requested.

Scope

A Certificate of Origin may cover a single importation of goods or multiple importations of identical goods. Certificates that cover multiple shipments are called blanket certificates and may apply to goods imported within any twelve-month period specified on the Certificate. Although a Certificate of Origin may cover goods imported over not more than a twelve-month period, it remains valid for NAFTA preference claims made up to four years from the date upon which it was signed.

A machine made in Canada qualifies for NAFTA tariff treatment and is exported with a Certificate of Origin signed on January 1, 1995. The U.S. importer does not enter the machine for consumption but instead places it in a customs bonded warehouse. He overlooks the Certificate of Origin and fails to claim NAFTA treatment for the machine upon entry into the warehouse. If the U.S. importer withdraws the machine from the warehouse for consumption on January 17, 1999, he will be barred from claiming NAFTA treatment upon withdrawal because the Certificate is over four years old and is no longer valid.

20 | P a g e

North American Free Trade Agreement 

Completion of Certificate

The Certificate of Origin must be completed and signed by the exporter of the goods. Where the exporter is not the producer, the exporter may complete the Certificate on the basis of:

knowledge that the good originates; reasonable reliance on the producer's written representation that the good

originates; or a completed and signed Certificate of Origin for the good voluntarily provided to

the exporter by the producer.

Importers' Obligations

Importers claiming NAFTA preferential tariff treatment shall make a declaration, based on a valid Certificate of Origin in their possession, on the import documentation. Where no claim for preferential tariff treatment is made at the time of importation, importers may request preferential tariff treatment no later than one year after the date on which the good was imported, provided a Certificate of Origin for the goods is obtained.

Importers must provide the Certificate to the importing country's customs administration upon request, and must submit a corrected declaration and pay the corresponding duties whenever there is reason to believe that the Certificate contained inaccurate information.

The customs administration of the importing country may deny preferential tariff treatment to the goods if the importer fails to comply with any of the customs procedures set out in Chapter Five of the NAFTA.

Importers must maintain records pertaining to the importation for five years or such longer period as may be specified by their country.

Exporters' and Producers' Obligations

Exporters or producers that prepare Certificates of Origin shall provide copies to their own customs administration upon request.

Exporters or producers that provide a Certificate of Origin must maintain records pertaining to the exportation for five years or such longer period as may be specified by their countries.

Exporters or producers that complete a Certificate of Origin shall notify all parties to whom the Certificate was given of any change that could affect its accuracy or validity.

21 | P a g e

North American Free Trade Agreement 

Diagramatic Records

NAFTA 2001

The most significant thing about this 2000 chart is that fact that despite lots of encouragement from federal and provincial governments for Canadian exporters to seek out markets in Asia, Europe and Latin America - we still do more than 87% of our business with the U.S.

Mexico - highly touted as an opportunity for us in 2001 and beyond, is the tiny slice of green in the chart to the left.

xx  

NAFTA 2006

In the later years of the 1990's it appeared that NAFTA was responsible for Canada doing more and more trade with the U.S. - and therefore increasing our vulnerability to swings in the U.S. economy and reducing our business with the ROW (rest of the world).

However, as the U.S. economy began to slow in the "Bush" administration, Canadian companies have sought more business with the rest of the world, which is reflected in an updated chart showing Canadian exports to the U.S.

 

22 | P a g e

North American Free Trade Agreement 

How NAFTA was in 1996?

.

How NAFTA was in 2006?

 since 2001, we have done much better diversifying away from exporting mostly to the U.S. and are improving our exports to Asia-Pacific and Europe

23 | P a g e

North American Free Trade Agreement 

24 | P a g e

North American Free Trade Agreement 

U.S. NAFTA trade deficit surging in 2003

U.S. NAFTA trade deficit surging in 2003

Since the U.S. entered into the North American Free Trade Agreement (NAFTA) with

Mexico and Canada, the trade deficit with these countries has grown rapidly (see chart

below). U.S. firms moved plants to Mexico and Canada to take advantage of lower wages

and new rules providing unheard of levels of protection for foreign investors. The

combined U.S. trade balance with the other two NAFTA countries (the difference

between U.S. exports and imports) was a small, stable deficit prior to NAFTA. Since

NAFTA that combined deficit has grown rapidly. U.S. imports have been growing more

rapidly than exports, so the trade deficit has expanded. When the growth of this deficit

eased in 2002, some claimed that U.S. trade with China and other lower-wage countries

was displacing NAFTA trade. Contrary to this view, the U.S. NAFTA deficit has

increased 12.2% so far this year, evidence that deficits with Mexico and Canada are a

continuing drag on U.S. growth and job creation.

Exports, which expand domestic production, increase the number of U.S. industrial

jobs, while imports, which replace goods that could have been produced in the United

25 | P a g e

North American Free Trade Agreement 

States, eliminate jobs. The rise in the U.S. deficit with Canada and Mexico from 1993

to 2000 displaced production supported by 766,000 U.S. jobs. Most of those jobs

would have been high-wage positions in manufacturing industries. The sustained

growth of this deficit suggests that NAFTA continues to eliminate more jobs in the

United States, which worsens the current economic downturn.

Further study of NAFTA by researchers in Canada and Mexico has shown that

workers in all three countries have been hurt, but for different reasons. In Mexico, real

wages have fallen sharply and there has been a sharp drop in the number of people

holding regular jobs in paid positions. Many workers have been shifted into

subsistence-level work in the "informal sector," frequently unpaid work in family

retail trade or restaurant businesses. In Canada, a decade of heightened competition

with the U.S. is eroding social investment in public spending on education, health

care, unemployment compensation, and a wide range of other public services. This

experience suggests that workers have good reasons to be concerned as we enter

NAFTA's second decade.

26 | P a g e

North American Free Trade Agreement 

What Is Barack Obama's Position on Free Trade?

Overall, Obama opposes many current trade agreements, which he says are bad for the economy because they provide perks for businesses but don't protect workers.

Obama Has Three Main Proposals:

1. Amend NAFTA - He would re-open NAFTA to beef up protection for labor and the environment.

2. Fight for Fair Trade - He opposes pending Free Trade Agreements (FTA's) with Colombia because it allows violence against labor leaders and South Korea because it restricts U.S. auto imports. He also wants to pressure the World Trade Organization to enforce current agreements and stop unfair subsidies.

3. Improve Transition Assistance - He supports Federal funding for retraining displace U.S. workers.

How Would Obama's Free Trade Position Impact the Economy?

Putting more job protection for U.S. workers in NAFTA and other FTA's may not help

American workers because it doesn't get at the source. Job outsourcing is a result of

declining U.S. competitiveness, which is itself a result of decades of the U.S. not

investing in education. This is particularly true for high tech, engineering, and science.

Opposing FTA's for two of America's closest allies, Colombia and South Korea, may

damage our relationship with them while hurting the U.S. economy. In fact, Colombia's

homicide rate against union members, and the public as a whole, has dropped 40%

since 2002 thanks to a government protection program.

27 | P a g e

North American Free Trade Agreement 

Rejection of the South Korean FTA could cause newly-elected South Korean President

Lee Myung-bak to further lose support among a population who are already upset that

he agreed to allow U.S. beef to be imported as part of the agreement. South Koreans

remember the cases of mad cow disease found in U.S. beef four years ago.

The agreement actually levels the playing field for the auto industry. Current South

Korean tariffs of 8% would be removed, as would current U.S. tariffs, which are lower at

3.5%.

NAFTA's open new markets for businesses by removing trade barriers. For example,

NAFTA increased trade from $297 billion to $810 billion. The Peterson Institute for

International Economics estimates that ending all trade barriers would increase U.S.

income by $500 billion.

Opening NAFTA to renegotiation would allow Mexico to address it complaints, including

immigration reform, U.S. farm subsidies and an unfulfilled NAFTA promise to allow

Mexican commercial trucks further into the U.S.

Free trade creates more jobs than it outsources. For example, the formation of the

European Union free trade area created 300,000–900,000 net new jobs. In the U.S, 1.3

million export-related jobs were created between 1994 and 1998.

Increasing U.S. protectionism will further slow economic growth and cause more layoffs,

not less. If the U.S. regresses and closes its borders, other countries will do the same.

This could cause layoffs among the 12 million U.S. workers who owe their jobs to

exports.

28 | P a g e

North American Free Trade Agreement 

What Free Trade Issues Is Obama Missing?

One of the key obstacles to the Doha round of the World Trade Organization agreement

was U.S. agricultural subsidies. Developing countries are afraid of low-cost, subsidized

U.S. farm products flooding their markets, essentially putting family farmers out of

business. Until the U.S. significantly reduces these subsidies, further progress on this

multi-lateral trade agreement is effectively dead in its tracks.

Contrary to popular opinion, agricultural subsidies no longer go to U.S. family farms.

Instead, tax programs that were designed to help Depression-era families keep their

farms are now effectively subsidizing huge corporations who have, in turn, put these

family farms out of business.

In fact, Obama's renewed pressure on the WTO to enforce other countries' subsidies

could then bring into question the subject of U.S. agricultural subsidies - still a sore point

in the international trade community. The failure of the Doha round has led to a fresh

wave of bilateral trade agreements between China, the Middle East, Latin America and

Africa. Further U.S. protectionism at this time will only increase this activity, thus pushing

the U.S. economy further out of the trade loop, and further into economic decline.

29 | P a g e

North American Free Trade Agreement 

Bibliography

- www.google.com

-www.wikipedia.org

-www.yahoo.com

NAFTA’s OFFICIAL SITE

NAFTA’S HITORY

30 | P a g e