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 This agreement superseded the Canada-the US Free Trade Agreement (FTA).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.

 http://www.naftanow.org/success/default_en.asp

“North American Free Trade Agreement.”NAFTANOW.ORG.the governments of Canada,the United States and Mexico,2 April. 2012.Web.5 June. 2014.

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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 20^th anniversary, it suggests that it is successful trade agreement.