North American Free Trade Agreement
Overview
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...

, and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, creating a trilateral trade bloc
Trade bloc
A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, are reduced or eliminated among the participating states.-Description:...

 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 It superseded the Canada – United States Free Trade Agreement between the U.S. and Canada.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 GDP of its members, the trade bloc is the largest in the world.

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).
Following diplomatic negotiations dating back to 1986 among the three nations, the leaders met in San Antonio, Texas
San Antonio, Texas
San Antonio is the seventh-largest city in the United States of America and the second-largest city within the state of Texas, with a population of 1.33 million. Located in the American Southwest and the south–central part of Texas, the city serves as the seat of Bexar County. In 2011,...

, on December 17, 1992, to sign NAFTA.
Encyclopedia
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...

, and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, creating a trilateral trade bloc
Trade bloc
A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, are reduced or eliminated among the participating states.-Description:...

 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 GDP of its members, the trade bloc is the largest in the world.

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).

Negotiation and U.S. ratification

Following diplomatic negotiations dating back to 1986 among the three nations, the leaders met in San Antonio, Texas
San Antonio, Texas
San Antonio is the seventh-largest city in the United States of America and the second-largest city within the state of Texas, with a population of 1.33 million. Located in the American Southwest and the south–central part of Texas, the city serves as the seat of Bexar County. In 2011,...

, on December 17, 1992, to sign NAFTA. U.S. President George H. W. Bush
George H. W. Bush
George Herbert Walker Bush is an American politician who served as the 41st President of the United States . He had previously served as the 43rd Vice President of the United States , a congressman, an ambassador, and Director of Central Intelligence.Bush was born in Milton, Massachusetts, to...

, Canadian Prime Minister Brian Mulroney
Brian Mulroney
Martin Brian Mulroney, was the 18th Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. His tenure as Prime Minister was marked by the introduction of major economic reforms, such as the Canada-U.S...

 and Mexican President Carlos Salinas
Carlos Salinas
Carlos Salinas de Gortari is a Mexican economist and politician affiliated to the Institutional Revolutionary Party who served as President of Mexico from 1988 to 1994. Earlier in his career he worked in the Budget Secretariat all the way up to Secretary...

, 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
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...

 came into office in the U.S. and Kim Campbell
Kim Campbell
Avril Phædra Douglas "Kim" Campbell, is a Canadian politician, lawyer, university professor, diplomat, and writer. She served as the 19th Prime Minister of Canada, serving from June 25, 1993, to November 4, 1993...

 in Canada, and before the agreement became law, Jean Chrétien
Jean Chrétien
Joseph Jacques Jean Chrétien , known commonly as Jean Chrétien is a former Canadian politician who was the 20th Prime Minister of Canada. He served in the position for over ten years, from November 4, 1993 to December 12, 2003....

 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
Canadian federal election, 1988
The Canadian federal election of 1988 was held November 21, 1988, to elect members of the Canadian House of Commons of the 34th Parliament of Canada. It was an election largely fought on a single issue: the Canada-U.S. Free Trade Agreement ....

 was fought almost exclusively on that issue. In that election more Canadians voted for anti-free trade parties (the Liberals
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...

 and the New Democrats
New Democratic Party
The New Democratic Party , commonly referred to as the NDP, is a federal social-democratic political party in Canada. The interim leader of the NDP is Nycole Turmel who was appointed to the position due to the illness of Jack Layton, who died on August 22, 2011. The provincial wings of the NDP in...

) but more seats in parliament were won by the pro-free trade Progressive Conservatives
Progressive Conservative Party of Canada
The Progressive Conservative Party of Canada was a Canadian political party with a centre-right stance on economic issues and, after the 1970s, a centrist stance on social issues....

 (PCs). Mulroney and the PCs had a parliamentary majority
Majority government
A majority government is when the governing party has an absolute majority of seats in the legislature or parliament in a parliamentary system. This is as opposed to a minority government, where even the largest party wins only a plurality of seats and thus must constantly bargain for support from...

 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
Kim Campbell
Avril Phædra Douglas "Kim" Campbell, is a Canadian politician, lawyer, university professor, diplomat, and writer. She served as the 19th Prime Minister of Canada, serving from June 25, 1993, to November 4, 1993...

, who then led the PC party into the 1993 election where they were decimated by the Liberal party under Jean Chrétien
Jean Chrétien
Joseph Jacques Jean Chrétien , known commonly as Jean Chrétien is a former Canadian politician who was the 20th Prime Minister of Canada. He served in the position for over ten years, from November 4, 1993 to December 12, 2003....

. Chrétien had campaigned on a promise to renegotiate or abrogate NAFTA, but instead negotiated the two supplemental agreements with the new U.S. president. In the U.S., Bush, who had worked to "fast track" the signing prior to the end of his term, ran out of time and had to pass the required ratification and signing into law to incoming president Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...

. Prior to sending it to the United States Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...

, Clinton introduced clauses to protect American workers and allay the concerns of many House members. It also required U.S. partners to adhere to environmental practices and regulations similar to its own. With much consideration and emotional discussion, the House of Representatives approved NAFTA on November 17, 1993, by a vote of 234 to 200. The agreement's supporters included 132 Republicans and 102 Democrats. NAFTA passed the Senate 61-38. Senate supporters were 34 Republicans and 27 Democrats. Clinton signed it into law on December 8, 1993; it went into effect on January 1, 1994. Clinton while signing the NAFTA bill stated: "...NAFTA means jobs. American jobs, and good-paying American jobs. If I didn't believe that, I wouldn't support this agreement."

Provisions

The goal of NAFTA was to eliminate barriers to trade and investment between the US, Canada and Mexico. The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

s on more than one-half of U.S. imports from Mexico and more than one-third of U.S. exports to Mexico. Within 10 years of the implementation of the agreement, all US-Mexico tariffs would be eliminated except for some U.S. agricultural exports to Mexico that were to be phased out within 15 years. Most U.S.-Canada trade was already duty free. NAFTA also seeks to eliminate non-tariff trade barriers..

Mechanisms

Chapter 20 provides a procedure for the interstate resolution of disputes over the application and interpretation of the NAFTA. It was modeled after Chapter 18 of the Canada-United States Free Trade Agreement.

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
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

'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 its poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

 rates fall and real income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...

 rise (in the form of lower prices, especially food), even after accounting for the 1994–95 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 US agribusiness
Agribusiness
In agriculture, agribusiness is a generic term for the various businesses involved in food production, including farming and contract farming, seed supply, agrichemicals, farm machinery, wholesale and distribution, processing, marketing, and retail sales....

, 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 US 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
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...

 and agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

.

TRADE: When Regarding trade in the North Atlantic Free Trade Agreement, this provision opened the door for open trade. Disregarding tariffs on various goods and services and implementing equality between Canada, America, and Mexico. Nafta Allowed agriculture goods to be tariff free such as eggs poultry and other meats and crops. This allowed Manufacturing goods and Corporations to trade freely and import and export various goods on a North American scale. Since the Implement of NAFTA the Countries involved have been able to :
Exports
•The NAFTA countries (Canada and Mexico), were the top two purchasers of U.S. exports in 2010. (Canada $248.2 billion and Mexico $163.3 billion).
•U.S. goods exports to NAFTA in 2010 were $411.5 billion, up 23.4% ($78 billion) from 2009, and 149% from 1994 (the year prior to Uruguay Round) and up 190% from 1993 (the year prior to NAFTA). U.S. exports to NAFTA accounted for 32.2% of overall U.S. exports in 2010.
•The top export categories (2-digit HS) in 2010 were: Machinery ($63.3 billion), Vehicles (parts) ($56.7 billion), Electrical Machinery ($56.2 billion), Mineral Fuel and Oil ($26.7 billion), and Plastic ($22.6 billion).
•U.S. exports of agricultural products to NAFTA countries totaled $31.4 billion in 2010. Leading categories include: red meats, fresh/chilled/frozen ($2.7 billion), coarse grains ($2.2 million), fresh fruit ($1.9 billion), snack foods (excluding nuts) ($1.8 billion), and fresh vegetables ($1.7 billion).
•U.S. exports of private commercial services* (i.e., excluding military and government) to NAFTA were $63.8 billion in 2009 (latest data available), down 7% ($4.6 billion) from 2008, but up 125% since 1994.
Imports
•The NAFTA countries were the second and third largest suppliers of goods imports to the United States in 2010. (Canada $276.5 billon, and Mexico $229.7 billion).
•U.S. goods imports from NAFTA totaled $506.1 billion in 2010, up 25.6% ($103 billion), from 2009, and up 184% from 1994, and up 235% from 1993. U.S. imports from NAFTA accounted for 26.5% of overall U.S. imports in 2010.
•The five largest categories in 2010 were Mineral Fuel and Oil (crude oil) ($116.2 billion), Vehicles ($86.3 billion), Electrical Machinery ($61.8 billion), Machinery ($51.2 billion), and Precious Stones (gold) ($13.9).
•U.S. imports of agricultural products from NAFTA countries totaled $29.8 billion in 2010. Leading categories include: fresh vegetables ($4.6 billion), snack foods, (including chocolate) ($4.0 billion), fresh fruit (excluding bananas) ($2.4 billion), live animals ($2.0 billion), and red meats, fresh/chilled/frozen ($2.0 billion).
•U.S. imports of private commercial services* (i.e., excluding military and government) were $35.5 billion in 2009 (latest data available), down 11.2% ($4.5 billion) from 2008, but up 100% since 1994.
Trade Balances
•The U.S. goods trade deficit with NAFTA was $94.6 billion in 2010, a 36.4% increase ($25 billion) over 2009.
•The U.S. goods trade deficit with NAFTA accounted for 26.8% of the overall U.S. goods trade deficit in 2010.
•The United States had a services trade surplus of $28.3 billion with NAFTA countries in 2009 (latest data available).

Investment
•U.S. foreign direct investment (FDI) in NAFTA Countries (stock) was $357.7 billion in 2009 (latest data available), up 8.8% from 2008.
•U.S. direct investment in NAFTA Countries is in nonbank holding companies, and in the manufacturing, finance/insurance, and mining sectors.
•NAFTA Countries FDI in the United States (stock) was $237.2 billion in 2009 (latest data available), up 16.5% from 2008.
•NAFTA countries direct investment in the U.S. is in the manufacturing, finance/insurance, and banking sectors.
•NOTE: Refers to private services trade not including military sales, direct defense expenditures, and other miscellaneous U.S. government services
http://www.fas.usda.gov/itp/policy/nafta/nafta.asp
http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta
http://www.nafta-sec-alena.org/en/view.aspx

Industry

Maquiladora
Maquiladora
A maquiladora or maquila is a concept often referred to as an operation that involves manufacturing in a country that is not the client's and as such has an interesting duty or tariff treatment...

s (Mexican factories that 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 export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...

s 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
Toluca
Toluca, formally known as Toluca de Lerdo, is the state capital of Mexico State as well as the seat of the Municipality of Toluca. It is the center of a rapidly growing urban area, now the fifth largest in Mexico. It is located west-southwest of Mexico City and only about 40 minutes by car to the...

, León
León, Guanajuato
The city of León, formally León de los Aldama is the sixth most populous city in Mexico and the first in the state of Guanajuato. It is also the seat of the municipality of León...

 and Puebla
Puebla, Puebla
The city and municipality of Puebla is the capital of the state of Puebla, and one of the five most important colonial cities in Mexico. Being a planned city, it is located to the east of Mexico City and west of Mexico's main port, Veracruz, on the main route between the two.The city was founded...

; all three larger in population than Tijuana
Tijuana
Tijuana is the largest city on the Baja California Peninsula and center of the Tijuana metropolitan area, part of the international San Diego–Tijuana metropolitan area. An industrial and financial center of Mexico, Tijuana exerts a strong influence on economics, education, culture, art, and politics...

, Ciudad Juárez
Ciudad Juárez
Ciudad Juárez , officially known today as Heroica Ciudad Juárez, but abbreviated Juárez and formerly known as El Paso del Norte, is a city and seat of the municipality of Juárez in the Mexican state of Chihuahua. Juárez's estimated population is 1.5 million people. The city lies on the Rio Grande...

, and Reynosa
Reynosa
Reynosa is a border city in the northern part of Tamaulipas, in the country of Mexico. It is located on the southern bank of the Rio Grande, directly across the border from McAllen, Texas in the United States. As of 2010, the city of Reynosa counts with a population of 607,532...

.

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
Commission for Environmental Cooperation
The Commission for Environmental Cooperation was established by Canada, Mexico, and the United States to implement the North American Agreement on Environmental Cooperation , the environmental side accord to the North American Free Trade Agreement...

 (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 were confirmed. NAFTA did not inherently present a systemic threat to the North American environment, as was originally feared, apart from potentially the ISDS
Investor state dispute settlement
Investor State Dispute Settlement provisions in international trade treaties grant investors covered by provisions with a right to initiate dispute settlement proceedings against foreign governments in their own right under international law....

 provisions of Ch 11. 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. 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.

Agriculture

From the earliest negotiation, agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

 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
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

 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
Liberalization
In general, liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. In some contexts this process or concept is often, but not always, referred to as deregulation...

 within a framework of phase-out periods (it was the first North–South
North-South divide
The north–south divide is a socio-economic and political division that exists between the wealthy developed countries, known collectively as "the north", and the poorer developing countries , or "the south." Although most nations comprising the "North" are in fact located in the Northern Hemisphere ,...

 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.

One of the most affected agricultural sectors is the meat industry. Mexico has gone from a small-key player in the pre-1994 U.S. export market to the 2nd largest importer of U.S. agricultural products in 2004, and NAFTA may be credited as a major catalyst for this change. The allowance of free trade removed the hurdles that impeded business between the two countries. As a result, Mexico has provided a growing meat market for the U.S., leading to an increase in sales and profits for the U.S. meat industry. This coincides with a noticeable increase in Mexican per capita GDP that has created large changes in meat consumption patterns, implying that Mexicans can now afford to buy more meat and thus per capita meat consumption has grown.

Production of corn
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...

 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
Vicente Fox
Vicente Fox Quesada is a Mexican former politician who served as President of Mexico from 1 December 2000 to 30 November 2006 and currently serves as co-President of the Centrist Democrat International, an international organization of Christian democratic political parties.Fox was elected...

, 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
Emigration
Emigration is the act of leaving one's country or region to settle in another. It is the same as immigration but from the perspective of the country of origin. Human movement before the establishment of political boundaries or within one state is termed migration. There are many reasons why people...

. 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
American Journal of Agricultural Economics
The American Journal of Agricultural Economics is a peer-reviewed academic journal of agricultural, natural resource, and environmental economics, as well as rural and community development. Published five times per year, it is one of two journals published by the Agricultural & Applied 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.

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),
73,880 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
TN status
TN status is a special non-immigrant status in the United States unique to citizens of Canada and Mexico. Professions identified in the Canada - United States Free Trade Agreement which began in 1988 are permitted TN Visas for legal work in the United States and Canada, creating freedom of labor...

). 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. Because DHS counts the number of the new I-94 arrival records filled at the border, and the TN-1 admission is valid for three years, 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 three-year admission period has expired, while other immigrants admitted earlier may change their status to TN or TD, or extend TN status granted earlier).

Canadian authorities estimated that, as of December 1, 2006, a 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).

Canadian disputes

There is much concern in Canada over the provision that if something is sold even once as a commodity
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....

, the government cannot stop its sale in the future. This applies to the water from Canada's lakes and rivers, fueling fears over the possible destruction of Canadian ecosystem
Ecosystem
An ecosystem is a biological environment consisting of all the organisms living in a particular area, as well as all the nonliving , physical components of the environment with which the organisms interact, such as air, soil, water and sunlight....

s 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. 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 additive MMT
Methylcyclopentadienyl manganese tricarbonyl
Methylcyclopentadienyl manganese tricarbonyl is an organomanganese compound with the formula Mn3. Marketed initially in 1958 as a supplement to the gasoline additive tetraethyl lead to increase the fuel's octane rating, MMT was later used in unleaded gasoline...

 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, from the Canadian government and the 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
Softwood
The term softwood is used to describe wood from trees that are known as gymnosperms.Conifers are an example. It may also be used to describe trees, which tend to be evergreen, notable exceptions being bald cypress and the larches....

 lumber imports, until new Canadian Prime Minister Stephen Harper
Stephen Harper
Stephen Joseph Harper is the 22nd and current Prime Minister of Canada and leader of the Conservative Party. Harper became prime minister when his party formed a minority government after the 2006 federal election...

 compromised 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.

Canada had filed numerous motions to have the duty eliminated and the collected duties returned to Canada. After the United States lost an appeal
Appeal
An appeal is a petition for review of a case that has been decided by a court of law. The petition is made to a higher court for the purpose of overturning the lower court's decision....

 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
Dumping (pricing policy)
In economics, "dumping" is any kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market, or in quantities that cannot be explained through normal market...

 and countervailing duty
Countervailing duties
Countervailing duties , also known as anti-subsidy duties, are trade import duties imposed under WTO Rules to neutralize the negative effects of subsidies. They are imposed after an investigation finds that a foreign country subsidizes its exports, injuring domestic producers in the importing country...

 orders." (Nick Lifton, spokesman for U.S. Trade Representative Rob Portman) On July 21, 2006, the United States Court of International Trade
United States Court of International Trade
The United States Court of International Trade is an Article III court, with full powers in law and equity. The Customs Court Act of 1980 replaced the old United States Customs Court with the United States Court of International Trade. The Court has nine sitting Judges, as well as Senior Judges...

 found that imposition of the duties was contrary to U.S. law.

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 April 29, 2009, a determination was made that this change in tax law was not expropriation.

Further criticism in Canada

A book written by Mel Hurtig
Mel Hurtig
Mel Hurtig, is a Canadian publisher, author, political activist and former political candidate.He was born and raised in Edmonton, Alberta. He is the former president of the Edmonton Art Gallery.-Businessman and Publisher:...

 published in 2002 called The Vanishing Country charged that since NAFTA's ratification more than 10,000 Canadian companies had been taken over by foreigners, and that 98% of all foreign direct investments in Canada were for foreign takeovers.

The term "the Double Yu(c)k Alliance aka NAFTA from Yukon
Yukon
Yukon is the westernmost and smallest of Canada's three federal territories. It was named after the Yukon River. The word Yukon means "Great River" in Gwich’in....

 to Yucatàn
Yucatán
Yucatán officially Estado Libre y Soberano de Yucatán is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 106 municipalities and its capital city is Mérida....

" was first used in 1994 by Miodrag Kojadinović
Miodrag Kojadinović
Miodrag Kojadinović is a Canadian-Serbian poet, linguist, interpreter, translator, erotica writer and theoretician of gender and sexuality.-Academic Involvement:...

 in his article "Friends and Neighbours: Dear Prime Minister of Canada, Kindly Join the EU Next Thursday".

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.

Impact on Mexican farmers

In 2000, U.S. government subsidies to the corn sector totaled $10.1 billion. These subsidies have led to charges of dumping
Dumping (pricing policy)
In economics, "dumping" is any kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market, or in quantities that cannot be explained through normal market...

, 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."

Zapatista Uprising in response to NAFTA in Chiapas, Mexico

The preparations for NAFTA included cancellation of Article 27 of Mexico's constitution, the cornerstone of Emiliano Zapata
Emiliano Zapata
Emiliano Zapata Salazar was a leading figure in the Mexican Revolution, which broke out in 1910, and which was initially directed against the president Porfirio Díaz. He formed and commanded an important revolutionary force, the Liberation Army of the South, during the Mexican Revolution...

's revolution of 1910–1919. Under the historic Article 27, Indian communal landholdings were protected from sale or privatization. But under NAFTA this guarantee was defined as a barrier to investment. With the removal of Article 27, Indian farmers would be threatened with loss of their remaining lands, and also flooded with cheap imports (substitutes) from the US. Thus, the Zapatistas labeled NAFTA as a "death sentence" to Indian communities all over Mexico. Then EZLN declared war on the Mexican state on January 1, 1994 the day NAFTA came into force.

Impact of NAFTA on Canada

Canada gained the most from NAFTA with Canada's GDP rate at 3.6%, growing faster than the United States at 3.3% and Mexico at 2.7%. Canadian employment levels have also shown steady gains in recent years, with overall employment rising from 14.9 million to 15.7 million in the early 2000s. Even Canadian manufacturing employment held steady. One of NAFTA's biggest economic effects on U.S.-Canada trade has been to boost bilateral agricultural flows. In the year 2008 alone, Canada exports to the United States and Mexico was at CAN$381.3 Billion Dollars and imports from NAFTA was at CAN$245.1 Billion Dollars. The Canadian mainstream has been so unanimous in its recognition of NAFTA's advantages despite a few odd detractors that even former NDP Gary Doer of Manitoba openly praises the benefits of NAFTA.

Chapter 11

Another contentious issue is the impact of the Investor state dispute settlement
Investor state dispute settlement
Investor State Dispute Settlement provisions in international trade treaties grant investors covered by provisions with a right to initiate dispute settlement proceedings against foreign governments in their own right under international law....

 obligations contained in Chapter 11 of the NAFTA. Chapter 11 allows corporations or individuals to sue Mexico, Canada or the United States for compensation when actions taken by those governments (or by those for whom they are responsible at international law, such as provincial, state, or municipal governments) have adversely affected their investments.

This chapter has been invoked in cases where governments have passed laws or regulations with intent to protect their constituents and their resident businesses' profits. Language in the chapter defining its scope states that it cannot be used to "prevent a Party from providing a service or performing a function such as law enforcement, correctional services, income security or insurance, social security
Social security
Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...

 or insurance
Social insurance
Social insurance is any government-sponsored program with the following four characteristics:* the benefits, eligibility requirements and other aspects of the program are defined by statute;...

, social welfare, public education
Public education
State schools, also known in the United States and Canada as public schools,In much of the Commonwealth, including Australia, New Zealand, South Africa, and the United Kingdom, the terms 'public education', 'public school' and 'independent school' are used for private schools, that is, schools...

, public training, health, and child care, in a manner that is not inconsistent with this Chapter."

This chapter has been criticized by groups in the U.S., Mexico, and Canada for a variety of reasons, including not taking into account important social and environmental considerations. In Canada, several groups, including the Council of Canadians, challenged the constitutionality of Chapter 11. They lost at the trial level, and have subsequently appealed.

Methanex Corporation, a Canadian corporation, filed a US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

970 million suit against the United States, claiming that a California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

 ban on Methyl tert-butyl ether
Methyl tert-butyl ether
Methyl tert-butyl ether, also known as methyl tertiary butyl ether and MTBE, is an organic compound with molecular formula 3COCH3. MTBE is a volatile, flammable, and colorless liquid that is immiscible with water. It has a minty odor vaguely reminiscent of diethyl ether, leading to unpleasant taste...

 (MTBE), a substance that had found its way into many wells in the state, was hurtful to the corporation's sales of methanol
Methanol
Methanol, also known as methyl alcohol, wood alcohol, wood naphtha or wood spirits, is a chemical with the formula CH3OH . It is the simplest alcohol, and is a light, volatile, colorless, flammable liquid with a distinctive odor very similar to, but slightly sweeter than, ethanol...

. However, the claim was rejected, and the company was ordered to pay US$3 million to the U.S. government in costs.

In another case, Metalclad
Metalclad
Metalclad is an American landfill management firm.-Guadalcázar landfill:Metalclad bought a landfill site in Mexico's city of Guadalcázar from a Mexican company Coterin in 1993. Coterin had planned to develop a hazardous waste landfill on the site but were unable to secure the necessary permits from...

, an American corporation, was awarded US$15.6 million from Mexico after a Mexican municipality refused a construction permit for the hazardous waste
Hazardous waste
A hazardous waste is waste that poses substantial or potential threats to public health or the environment. According to the U.S. environmental laws hazardous wastes fall into two major categories: characteristic wastes and listed wastes.Characteristic hazardous wastes are materials that are known...

 landfill it intended to construct in Guadalcázar
Guadalcázar, San Luis Potosí
Guadalcázar is a small, municipal town located in the Mexican state of San Luis Potosí.-History:The town was one of the many colonies founded by Spanish explorer Juan Cordoba de Guadalcazar. In the decades following its creation, Guadalcazar flourished as a wealthy town. Its main exports were...

, San Luis Potosí
San Luis Potosí
San Luis Potosí officially Estado Libre y Soberano de San Luis Potosí is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 58 municipalities and its capital city is San Luis Potosí....

. The construction had already been approved by the federal government with various environmental requirements imposed (see paragraph 48 of the tribunal decision). The NAFTA panel found that the municipality did not have the authority to ban construction on the basis of the environmental concerns.

Chapter 19

Also contentious is NAFTA's Chapter 19, which subjects antidumping and countervailing duty (AD/CVD) determinations to binational panel review instead of, or in addition to, conventional judicial review. For example, in the United States, review of agency decisions imposing antidumping and countervailing duties are normally heard before the U.S. Court of International Trade
United States Court of International Trade
The United States Court of International Trade is an Article III court, with full powers in law and equity. The Customs Court Act of 1980 replaced the old United States Customs Court with the United States Court of International Trade. The Court has nine sitting Judges, as well as Senior Judges...

, an Article III court
Article I and Article III tribunals
In the United States, the American legal system includes both state courts and United States federal courts. The federal tribunals may be an Article III tribunal or another adjudicative body classified as an Article I or an Article IV tribunal...

. NAFTA parties, however, have the option of appealing the decisions to binational panels composed of five citizens from the two relevant NAFTA countries. The panelists are generally lawyers experienced in international trade law. Since the NAFTA does not include substantive provisions concerning AD/CVD, the panel is charged with determining whether final agency determinations involving AD/CVD conform with the country's domestic law. Chapter 19 can be considered as somewhat of an anomaly in international dispute settlement since it does not apply international law, but requires a panel composed of individuals from many countries to reexamine the application of one country's domestic law.

A Chapter 19 panel is expected to examine whether the agency's determination is supported by "substantial evidence." This standard assumes significant deference to the domestic agency.

Some of the most controversial trade disputes in recent years, such as the U.S.-Canada softwood lumber dispute, have been litigated before Chapter 19 panels.

Decisions by Chapter 19 panels can be challenged before a NAFTA extraordinary challenge committee. However, an extraordinary challenge committee does not function as an ordinary appeal. Under the NAFTA, it will only vacate or remand a decision if the decision involves a significant and material error that threatens the integrity of the NAFTA dispute settlement system. Since January 2006, no NAFTA party has successfully challenged a Chapter 19 panel's decision before an extraordinary challenge committee.

Impact NAFTA had on Canada and Mexico
Canada experiences huge economic growth NAFTA enacted, and gained the most out of all three parties. Canada reached their highest average annual growth of 3.6%, Mexico having 2.7% and the U.S at 3.3%

See also

  • Comprehensive Economic and Trade Agreement
    Comprehensive Economic and Trade Agreement
    The Comprehensive Economic and Trade Agreement is a proposed free trade agreement between Canada and the European Union.CETA is Canada's biggest bilateral initiative since NAFTA....

     (CETA)
  • Economic Community of West African States
    Economic Community of West African States
    The Economic Community of West African States is a regional group of fifteen West African countries. Founded on 28 May 1975, with the signing of the Treaty of Lagos, its mission is to promote economic integration across the region....

  • European Economic Area
    European Economic Area
    The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...

  • European Free Trade Association
    European Free Trade Association
    The European Free Trade Association or EFTA is a free trade organisation between four European countries that operates parallel to, and is linked to, the European Union . EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who were either unable to, or chose not to,...

  • European Union
    European Union
    The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

  • Giant sucking sound
    Giant sucking sound
    The "giant sucking sound" was United States Presidential candidate Ross Perot's colorful phrase for what he believed would be the negative effects of the North American Free Trade Agreement , which he opposed.- History :...



Further reading


External links

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