NORTH AMERICAN FREE TRADE AGGREMENT

NAFTA

INTRODUCTION
North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America The agreement came into force on January 1, 1994 Eliminated tariffs

Largest free trade zone

In terms of combined GDP of its members, as of 2010 the trade bloc is the largest in the world.

OBJECTIVE
The purpose of the agreement is to: Allow free movement of goods and services among the countries. Promote competition in the free trade areas. Protect the property rights of people and businesses in each country. Be able to resolve problems that arise among the countries.

Encourage cooperation among countries.

NAFTA SUPPLEMENTS
The North American Free Trade Agreement (NAFTA) has two supplements:the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labour Cooperation (NAALC) (NAAEC) was a response to environmentalists' concerns that the United States would lower its standards if the three countries did not achieve consistent environmental regulation.

(NAALC) supplements NAFTA and endeavors to create a foundation for cooperation among the three countries for the resolution of labour problems, as well as to promote greater cooperation among trade unions and social organizations in order to fight for improved labor conditions.

 Trade and Investment Effects NAFTA is a broad agreement, but improved market access, including tariff reductions on merchandise trade, was the major U.S. goal. After ten years, most tariffs have gone to zero, except for some very sensitive (mostly agricultural) goods that have limited protection for up to 15 years. Clearly, U.S.-Mexico trade and investment have grown sharply over the past decade. From 1994 to 2003, U.S. exports to Mexico rose 91%, compared to 41% to the world. U.S. imports increased by 179%, compared to 89% from the world.

U.S. NAFTA TOTAL TRADE 1990-2004

800 700 713.0 657.1 612.3 627.0 602.1 561.9 503.3 477.3 421.2 380.6 343.2 293.2 265.0 2 233.540.6

BILLION DOLLARS

600 500 400 300 200 100 0

1990

1992

1994

1996

1998

2000

2002

2004

EFFECTS OF NAFTA
BENEFITS

Benefits the importers by reduced or duty free goods.

Can make the exporter more competitive then other nonparticipating countries 200% increase in trade among the 3 countries. Increase market access within each country.

LIMITATIONS
It has negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness It has 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