What is NAFTA?
The
North American Free Trade Agreement (NAFTA) is a the agreement which was signed by Prime Minister Brian Mulroney, Mexican
President Carlos Salinas, and U.S. President George H.W. Bush and entered
into force on January 1 ,1994 between United Stated, Canada
and Mexico. The purpose of the agreement is to create the largest trade block
in the world, boost economic growth in the three countries and to raise the
standard of living for the people of all three countries to the highest level.
What initiated NAFTA?
In
signing the North American Free Trade Agreement January 1,1994, Canada, the US
and Mexico intended to create the largest trading block in the world. Canada
had two previous trade agreements with the US before entering into NAFTA.
l Step
1) The Canada-United States Automobile Agreement was signed in 1965. This
agreement allowed the duty-free movement of most automobiles between Canada and
the US. At that time, Canada’s small populations prevented it from developing a
strong domestic automobile industry. By creating free trades with the US,
Canada could produce more automobiles and pay workers higher wages.
l Step
2) A second free trade agreement-FTA(Free Trade Agreement) came into being on
January 1, 1989. This agreement
a) eliminated
tariff barriers to trade in goods and services
b) facilitated
fair competition
c) liberalized
conditions for investment
d) established
procedures to resolve disputes
e) laid
the conditions for future bilateral and multilateral trade agreements.
l Step
3) NAFTA (the North American Free Trade Agreement) came into being January 1,
1994. This agreement superseded the Canada-the US Free Trade Agreement (FTA).
.
This agreement
a)
eliminated trade barriers and encouraged
movement of goods and services among Canada, the US and Mexico
b)
encouraged fair competition
c)
increased investment opportunities
d)
protected intellectual property rights
e)
created procedures to administer agreement
jointly
f)
established framework to encourage future trilateral,
regional and multilateral benefits of agreement.
Impact of NAFTA on Canada
Positive point of view; Mexico is a growing
market, and offers Canadian businesses large international markets. Duty-free access
to Mexico has allowed Canada to compete with the Unites States duty-free access
to Mexico. Both Canada and Mexico are increasing their market share in the US.
They have an advantage over nations that are not part of NAFTA. Canadian clothing
and furniture industries have increased exports to the US and Mexico. Mexican
investment in Canada has tripled. Mexican products now have easier access to
Canada than before NAFTA existed.
Negative point of view; Low wages in Mexico
threaten Canadian businesses and Canadian jobs. Mexican pollution controls are
not as strict as Canada’s. Provincial governments will no longer be able to
give preferential treatment to local businesses. Cross-border trade disputes
still exist. Will Canadian workers who lose jobs when companies move to Mexico
or the US might not find future employment.
NAFTA Promotes Vibrant Trade Relations
The lifting of trade
barriers has made it easier for companies to operate across Canadian, United
States and Mexican borders.
Success
stories
l Bombardier
Taking
advantage of duty-free access to the United States and Mexican borders for
automotive parts, Bombardier exemplifies the vibrant trade relations that have
developed since NAFTA came into force in 1994.Bombardier has manufacturing
plants in Thunder Bay, Ontario; La Pocatière, Quebec, New York State and Pennsylvania,and
Sahagun, Mexico. Elimination of trade barriers has made this possible for
Bombardier.
l Mary Kay
The elimination of tariffs
under NAFTA and geographical proximity among the North American countries
allows for shorter processing times, making business opportunities in the
region for direct selling companies like Mary Kay even more attractive. In
2007, Mary Kay Mexico opened a new headquarters and distribution center in the
Nuevo Leon region of Northern Mexico. This is good for Mary Kay and Mexican
workers.
l Modelo
As a result of NAFTA, the
Mexican beer producer is able to import barley duty-free from the U.S. and
Canada. Because of growing Mexican beer exports, domestic barley production has
also increased significantly since NAFTA was enacted.
“North American Free Trade Agreement.”NAFTANOW.ORG.the
governments of Canada,the United States and Mexico,2 April. 2012.Web.5 June.
2014.
.
Video
https://www.youtube.com/watch?v=MA6KvuYB6R4
In my opinion, NAFTA
has more positive than negative aspects. In fact it has helps to enlarge Canadian,
American, and Mexican trade markets. Since this was the initial goal of forming
NAFTA, it is successful. When disputes occur among member countries, the
agreement has mechanisms to resolve the disputes. Since globalization of trade
markets is occurring all over the world, it is advantageous to Canada, the US
and Mexico to make NAFTA work. Other country can also use NAFTA as a model to
create their trade agreements. The fact that NAFTA is celebrating its 20th
anniversary, it suggests that it is successful trade agreement.