NAFTA, the North American Free Trade Agreement, is a trilateral trade agreement between the United States, Canada and Mexico that went into effect in 1994. The agreement&rsquo;s primary objective is to promote free and fair trade among these countries by reducing barriers to trade and investment and by providing rules for interstate commerce that can be monitored and enforced by interstate bodies and mechanisms.
The negotiation and implementation of NAFTA came soon after Congress approved the U.S.-Canada Free Trade Agreement in 1988. Diplomatic trade negotiations between the three countries began in 1991, and U.S. President George H.W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas signed NAFTA in 1992. Changes in American and Canadian national leadership led to alterations of the agreement and the addition of two complimentary treaties--the North American Agreement on Environmental Cooperation and the North American Agreement on Labor Cooperation--Congress and the Canadian Parliament ratified NAFTA in 1994.
As noted by the three governments on their joint NAFTA website, NAFTA &ldquo;is a complex and lengthy document that includes eight sections, 22 chapters, and some 2,000 pages.&rdquo; It contains provisions to eliminate tariffs and to reduce non-tariff barriers to free trade (such as import licenses and local content, production and performance rules) among the three countries. Highlights include a plan to eliminate all tariffs on North American industrial products and measures to protect intellectual property rights, promote open and secure interstate investment and allow for open and fair interstate competition for government procurement contracts.
A trilateral Free Trade Commission and the NAFTA Secretariat were created with NAFTA. The Free Trade Commission is responsible for the regular review of trade relations among the three countries. Where appropriate, it can create bilateral or trilateral panels of private sector experts to hear disputes involving the interpretation and application of NAFTA. NAFTA&rsquo;s Secretariat is responsible for administering dispute resolution processes under Chapter 14 (financial service regulations), Chapter 19 (anti-dumping), Chapter 20 (interpretation and application of NAFTA) and Chapter 11 (foreign direct investment).
Officials attribute increased trade volume and North American economic growth to the provisions of NAFTA. According to the intergovernmental website NAFTA Now, &ldquo;trilateral merchandise trade has nearly tripled since 1994&rdquo; and the combined gross domestic products of the three countries more than doubled between 1993 and 2008. Officials also attribute increased foreign direct investment within North America to NAFTA, and this has been especially helpful in supporting the modernization of Mexico&rsquo;s industrial base.
The U.S., Canada and Mexico state that NAFTA&rsquo;s labor provisions have helped improve labor conditions and living standards in all three countries; they have raised the public profile of labor rights issues such as pregnancy-based discrimination, secret ballot voting and the protection of migrant workers. Better access to materials, technologies and investment capital provided by NAFTA make businesses in all three countries more competitive within the continent and abroad, and greater market competitiveness increases consumer choice and purchasing power.
From the point of view of the U.S., some have argued that NAFTA has contributed to deindustrialization and the loss of manufacturing jobs to Mexico. The NATO Now website calls this a myth and notes that U.S. manufacturing output grew at a higher rate between 1993 and 2008 (62 percent) than between 1980 and 1993 (42 percent). However, these statistics may reveal more about the growth of automated manufacturing processes and increased productivity than highlight the prevalence of manufacturing jobs; according to the U.S. Bureau of Labor Statistics, there are almost 6 million fewer people employed in manufacturing jobs in the U.S. in 2010 than there were in 1994.
- world trade image by Chad McDermott from Fotolia.com