NAFTA Essay, Research Paper
The North American Free Trade Agreement (NAFTA), which built on the 1989
U.S.-Canada Free Trade Agreement (CFTA), is the most comprehensive regional free
trade agreement ever negotiated. It created the world’s largest free trade area:
380 million people producing nearly $8 trillion dollars worth of goods and
services. On January 1, 1994 the North American Free Trade Agreement entered
into force. One of the main objectives of the Agreement is the elimination of
tariffs between Canada, Mexico and the United States on "qualifying"
goods by the year 1998 for originating goods from Canada and for originating
goods from Mexico by the year 2008. Positive Effects on NAFTA Growth in Trade:
A+ Total North American trade increased from $293 billion in 1993 to $420
billion in 1996, a gain of $127 billion or 43 percent during NAFTA’s first three
years. Mexico and Canada purchased $3 of every $10 in U.S. exports and supplied
$3 of every $10 in U.S. imports in 1996. Growth in U.S. Exports: A+ Thanks to
NAFTA, Mexican tariffs?which had averaged 10 percent before the trade
agreement was implemented?now average less than 6 percent, while average U.S.
tariffs have fallen from 4 percent to about 2.5 percent. As a result, U.S.
exports to Mexico grew by 37 percent from 1993 to 1996, reaching a record $57
billion.3 During this period, U.S. exports to Canada also increased by 33
percent, to $134 billion. Total two-way trade between the United States and
Canada was $290 billion in 1996, while total two-way trade between the United
States and Mexico was nearly $130 billion. Moreover, U.S. market share in Mexico
increased from 69 percent of total Mexican imports in 1993 to 76 percent in
1996. During NAFTA’s first three years, 39 of the 50 states increased their
exports to Mexico; moreover, 44 states reported a growth in exports to Mexico
during 1996 as the pace of U.S. exports to that country accelerated. NAFTA has
shattered the myth that U.S. trade deficits destroy U.S. jobs. The combined U.S.
trade deficit with Canada and Mexico increased during the first three years of
NAFTA’s implementation?from $9 billion in 1992 to $39.9 billion in
1996?because Canada and Mexico suffered economic recessions. U.S. exports to
NAFTA countries currently support 2.3 million U.S. jobs. The largest post-NAFTA
gains in U.S. exports to Mexico have been in such high-technology manufacturing
sectors as transportation and electronic equipment, industrial machinery,
plastics and rubber, fabricated metal products, and chemicals. NAFTA has
encouraged U.S. and foreign investors with apparel and footwear factories in
Asia to relocate their production operations to Mexico. U.S. Compliance with
NAFTA: B In December 1995, the Clinton Administration postponed indefinitely the
implementation of a NAFTA deadline to allow Mexican trucks to circulate in the
southwest United States. U.S.-Mexico Trade Relations: B President Clinton’s
first official trip to Mexico this month came at a time in which relations
between the two countries were at their lowest point in years. The trade and
investment growth achieved during NAFTA’s first three years has been eclipsed by
the peso crisis and political turmoil in Mexico and by growing bilateral
tensions over drug control policy, immigration, and the Helms-Burton Act’s
tightening of economic sanctions against Cuba. These tensions in U.S. Mexico
relations have surfaced because the Clinton Administration did not assign a
sufficiently high priority to Mexico during its first term in office. NAFTA,
however, was never intended to be anything other than a free trade agreement?a
three-way pact by the United States, Mexico, and Canada to eliminate all tariff
and non-tariff barriers to trade over a period of 10 to 15 years. NAFTA was
designed to encourage faster growth in North American trade and investment,
which it has been doing successfully since January 1, 1994. Reform Process in
Mexico: A One of NAFTA’s important achievements has been to "lock in"
the process of economic and political reform under way in Mexico for the past
decade. Mexico’s membership in NAFTA, the World Trade Organization, the
Asia-Pacific Economic Cooperation forum, and the Organization for Economic
Cooperation and Development has created international commitments and linkages
that it cannot ignore. Even though The Heritage Foundation’s 1997 Index of
Economic Freedom still accords Mexico a ranking of 3.35, or "Mostly Not
Free,"12 Mexico has become a more democratic country since NAFTA was
implemented. Negative Effects on NAFTA On the Mexican Side: Pa?l Picard del
Prado, president of the Food Board at the National Manufacturing Industry
Chamber (Canacintra), says the first five years of the North American Trade
Agreement (Nafta) have been good for Americans, but not for Mexicans. Meanwhile,
assembly plants that export semi-finished goods (maquiladoras) have seen
significant growth under Nafta. The Border Trade Alliance, however, will focus
on Nafta’s future at its first international conference next month in Monterrey,
Mexico, entitled "The 21st Century: Planning the Way." Companies with
high import-export volumes do business in dollars, while professionals like
lawyers or accountants bill clients in dollar rates. But that dollarization
touches only a certain upper crust of society some observers contend. A recent
poll surprised many political analysts when it showed that two-thirds of
respondents in the industrial city of Monterrey, and more than half of
respondents in Mexico City, were ready to welcome the dollar as their
currency. On the American Side The American Coalition for Competitive Trade
(known as ACCT) plans this month to file the first of several legal challenges
to the NAFTA and GATT treaties and the $53 million bailout of Mexico. Two years
ago, at an ACCT conference on NAFTA, von Raab predicted that passage of the
trade agreement linking the Mexican and American economies would lead to
"chaos on the border," and so it has. Thomas Considine, director of
the federal government’s Drug Enforcement Administration, advised a Senate
committee in August that drug gangs in Mexico could eventually rival the
ruthless ring now operating in Colombia. A Congressional Joint Economic
Committee reported that "Mexican imports to this country cost the United
States 137,000 jobs" in the nine months following passage of NAFTA. Imports
from Mexico have soared since then, perhaps tripling the job-loss figure.
"Trade with Mexico has been a big factor in the expanding U.S. trade
deficit this year," says trade correspondent Richard Lawrence in the August
18th Journal of Commerce. A study by Vanderbilt University documents some of the
specific consequences of NAFTA: tomato production down 25 percent in Florida,
Scott Paper Company cutting more than 10,000 jobs worldwide prior to opening
multimillion-dollar plants in Mexico, the virtual elimination of the apparel
industry in the United States. Environmental Issues Trade agreements can have
negative impacts on efforts to achieve sustainable development if they do not
adequately address environmental issues. Increased wealth as envisaged within
NAFTA, and that this would inevitably lead to better environment was a misnomer
recognized by Canada, USA and Mexico. Increase trade volumes and general spiral
in a population’s wealth have environmental impacts. Environmental regulations
by individual countries affect others. There are several fundamental
environmental issues that are currently being addressed by NAFTA. Permist trade
in compliance with or to enforce international conservation or environmental
protection agreements. The future of NAFTA and the environment is promising.
NAFTA will help clean up existing problems and result in better environmental
protection. NAFTA vigorously addresses Mexico – US cross border issues and will
promote public participation and due process. For the first time in Mexico,
NAFTA guarantees public right of access of information about environmental
non-compliance, and improved rights of private From US perspective, NAFTA works
for continued enforcement of the Montreal (CFC) Protocol, the Convention on
International Trade in endangered species, and 36 other international
agreements. It also ensures that countries can continue to enforce environmental
laws. Future of NAFTA NAFTA AND THE FREE TRADE AREA OF THE AMERICAS The NAFTA
contains a very simple clause that states that if agreed to by the United
States, Mexico, and Canada, other countries may accede to this agreement. Chile
subsequently negotiated separate bilateral arrangements with Mexico and Canada,
leaving U.S. firms at a relative disadvantage. The CEOs noted that fast track
was the key to winning congressional approval of NAFTA expansion, and added that
" without new fast track authority, there can be no expansion of NAFTA to
include Chile or other Central and South American countries, and America?s
global trade leadership will be irreparably harmed."(UE News). Labor
Unions, human-rights groups, protectionists, and some environmental
organizations have debated the issue of benefits of trade and investment to the
US by the current NAFTA agreement, and have strongly opposed the expansion of
NAFTA. The Future of Rules of Origin in NAFTA Trade As tariff rates on goods
traded between the three NAFTA countries continue to decline, NAFTA originating
products will gain competitive advantage within the North American market. This
advantage makes compliance with NAFTA rules of origin ever more important. At
present, however, investors in Mexico may find in- bond duty drawback programs
to offer greater tariff reduction than the NAFTA preferential duties. Pitex and
Maquiladora programs were established years ago to promote the export industry
in Mexico and create desperately needed jobs. These programs allow materials and
equipment to enter the country duty free and the only tariff charge is over the
value added to the exported finished product. Under NAFTA, an increasing
proportion of maquiladora output can be sold in Mexico (currently 80 percent of
a firm’s prior year output) reaching 100 percent in 2001.
T CNN TIME, "Expanding NAFTA Needs Congressional Approval." CNN.Com.
Feb.26, 1997. UE NEWS, " New NAFTA Battle Looms." Rankfile-ue.org.
Sept. 14, 1999. CNN World News, "In Chile, Clinton seeks patience on free
trade." CNN.Com.April 16,1998. "Accession of Chile to NAFTA."
Psirus.sfsu.edu. January, 1998. Nafta and GATT Hurt U.S. Economy. Duplantier,
F.R. 11Oct 1999 < http://www.americasfuture.
net/1995/oct95/af-1022c.html>. NAFTA AND GATT Undermine Sovereignty.
Duplantier, F.R. 11 Author: Title: Year:1996 3.http://e3-5b.tamiu.edu/cgi-bin/as_web.exe?ftax99.ask+D+606900
Author:LaFranchi, H. Year:1999 Title:Mexicans start to sing, adiyos peso- hello
$$$ 4.http://www.mexdirect.com/invest/brief.regulatory.nafta.rulesoforigin.05.html
Title:The future of rules of Origin in NAFTA Trade Author: Mexico Direct
Year:1998 By the way you can find good graphics in http://www.usmcoc.org/naftafor.html
I used that reference also but i forgot to write it above.