North American Free Trade Association (NAFTA)
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Too many trading forums and treaties are talked and debated about but we hardly remember their actual accomplishments. The North American Free Trade Agreement or NAFTA, which came into force on January 1, 1994, is not just another treaty that aims to facilitate trade between its member nations. It is one of the world’s most powerful and successful treaties comprising the United States, Canada and Mexico.
Too many trading forums and treaties are talked and debated about but we hardly remember their actual accomplishments. The North American Free Trade Agreement or NAFTA, which came into force on January 1, 1994, is not just another treaty that aims to facilitate trade between its member nations. It is one of the world’s most powerful and successful treaties comprising the United States, Canada and Mexico.
The North American Agreement for Labor Cooperation (NAALC) and North American Agreement for Economic Cooperation (NAAEC) are major additions to this treaty. Following the unfortunate September 11/2001 attack in the US, the Security and Prosperity Partnership of North America (SPPNA) was also added to NAFTA.
Interestingly, the goods that are traded between the NAFTA members feature labels. These labels are printed in three languages, namely, English, Spanish and French. No doubt, NAFTA has been highly beneficial for consumers, farmers and ranchers.
Table of Contents
How NAFTA Works
The major functions of NAFTA are:
- Eliminate trade barriers in various service sectors belonging to its member nations.
- Reduce high Mexican tariffs and help to promote agricultural exports.
- Assist firms spanning the three nations to bid on government contracts.
- Assure fair market value to investors by reducing risk and offering the same legal rights that are enjoyed by local investors.
- Help investors to claim against a government by offering legal help.
NAFTA: Achievements
The achievements of NAFTA are:
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Spanning 1992 to 2007, agricultural exports grew from the US to Canada and Mexico at 156%
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From 1993 to 2007, there was percentage increment of goods exports by 231% to the U.S from Canada and Mexico
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In 2006, the export of services from the US to Mexico and Canada increased from $25 billion to $62 billion (125%). The same period witnessed increase in services export reach $37 billion from Canada and Mexico
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In 2006, the U.S. foreign direct investment (FDI) increased to $331 billion in Canada and Mexico
NAFTA: Challenges and Prospects
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Resolve current trade disputes pertaining to sugar, softwood lumber and trucking, just to mention a few.
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Address the issue of 10 million illegal Mexican immigrants in the US.
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Include Mexico in important provisions relating to investments.
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Enable funding and adequate mandates for key institutions like NADBank (North American Development Bank).
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Resolve the trade deficit of the US with Canada and Mexico, which grew from $9.1 billion in 1993 to $138.5 billion in 2007.
