NORTH AMERICAN FREE TRADE AGREEMENT(NAFTA)
ABHIJIT ROY AKRAM AZAD ALOK KUMAR
AMIT AGARWAL AMIT KUMAR ANIMESH UKIL
ANUSHREE HALDAR BHARAT PATEL
WHAT IS NAFTA?
• The North American Free Trade Agreement
(NAFTA ) is a trilateral trade bloc in North
America created by the governments of the
United States, Canada, and Mexico
• The agreements were signed in December
1993 by the presidents of the three countries
and it came into effect from 1st Jan. 1994
• NAFTA entered into force on January 1, 1994.
• The final provisions were fully implemented on January 1, 2008.
• NAFTA created the world largest free trade area which now
• links 450 million people producing 17 trillion worth of goods and
• “trade between the United States and its NAFTA partners has
soared since the agreement entered into force.”
• Final provisions (NAFTA) were fully implemented
on January 1, 2008.
• NAFTA one of the most successful trade
agreements in history and has contributed to
significant increases in agricultural trade and
• Most comprehensive Regional Trade Agreement
signed by the United States
• January 1989. FTA between the US and Canada
goes into effect. Mexico Joins Discussions.
• September 1990. Canada, the United States, and
Mexico agree to negotiate a FTA.
• June 1991. Trilateral negotiations between
Canada, Mexico, and the United States open in
• August 12, 1992. NAFTA negotiations completed.
• December 17, 1992. President Bush, President Salinas,
and Prime Minister Mulroney sign the NAFTA.
• June 30, 1993. US District Court declares that NAFTA
will be illegal as the Executive Branch did not conduct a
full environmental impact study on the results of the
• November 18, 1993. US Congress approves NAFTA
• November 22, 1993. Mexican congress approves
• January 1, 1994. NAFTA implemented.
• NAFTA is the first agreement “between two industrial countries and
a developing nation
• “Canada and Mexico share many common experiences in their
historical relationship to the U.S., including economic and cultural
penetration and loss of territory”
• “NAFTA is one of the only truly positive interactions the countries
[Mexico and the U.S.] have had since 1821, when Mexico achieved
its independence from Spain”
• Mexico had the initiative for the treaty, not the United States
• [Mexico] “is Latin America number - one exporter and occupies
thirteenth place worldwide”
• [NAFTA] was the “most ambitious trade agreement anywhere in the
world among countries with such extreme differences in income
and development but with a geographical proximity that allows
integration to take place beyond the trade factor”
• NAFTA would be larger in territory, population, and product than
the first fifteen members of the European Union combined
• “There was a fear of job loss and low wages, more damage to
struggling U.S. and Canadian economies, and the continued
deterioration of the environment among other reasons not to
support the agreement”
• Negotiation and signing of NAFTA represents a fascinating recent
case of the demise of long - standing policy frontiers
• After ten years after the enactment of NAFTA, “new and larger
linkages have emerged in goods and services
• production, there has been reallocation of productive capacities
and labour markets have become more integrated
• “A total of 21.9 million new jobs were created in the non
agricultural sector during the period of 1994 - 2002, with 16 million
in the US, 3.4 million in Mexico, and 2.4 million in Canada”
NAFTA‟S MAIN OBJECTIVES
• Eliminate barriers to trade in, and facilitate the cross – border
movement of, goods and services between the territories of the
• Promote conditions of fair competition in the free trade area;
• Increase substantially investment opportunities in the territories of
• provide adequate and effective protection and enforcement of
intellectual property rights in each Party's territory;
• Create effective procedures for the implementation and application
of this Agreement, for its joint administration and for the resolution
of disputes; and
• Establish a framework for further trilateral, regional and
multilateral cooperation to expand and enhance the benefits of this
NAFTA COUNTRIES AND CULTURAL
• “Whether they [nations] are ready for the enormous intercultural
challenge this [treaty] implies or not, they will benefit from a
culturally sensitive outlook and an honest effort to respect and
understand the world from one another ‟respective vantage point”
• “Collaborative efforts can reduce ethnocentrism, make cultural
research more applicable, and increase discussion about culture”
• NAFTA is a “pathway to regional integration”
• “The cultural differences between Mexicans and Americans are so
great that they are two opposite versions of Western civilization”
• Mexico has to overcome more differences than its counterparts.
• Language and cultural differences are crucial aspects that
“Mexicans have to face when applying for a job in the United
• “Workers have an average educational level of 12.6 years in the U.S.
and 11.7 years in Canada, the average drops to 6.7 years in the case
EDUCATIONAL CHANGES WITHIN THE
• NAFTA is the first FTA that “also includes services and education”
• “Appropriate education enables individuals to learn about and
respect the prevailing cultural norms in each country, thereby
increasing the possibilities of success in commercial relationships”
• The Consortium for North American Higher Education Collaboration
(CONAHEC), is considered a collaborative effort between the U.S.
• CONAHEC is housed at the University of Arizona.
• Its mission is “to serve as a bridge of understanding among the
higher education systems and institutions in Canada, Mexico, and
the United States and to remove obstacles to academic exchange in
North America — working toward academic integration”
• For Mexico, “collaborative efforts translate into improvement of the
educational system, which is vital for Mexico economic potential”
• In addition to internal efforts to improve education in Mexico,
there are some collaborative efforts between the United States
and Mexico which most of them take place on the U.S. - Mexico
• The U – S -Mexico: “one of the world most urbanized
• The still existing poor educational systems in Mexico are the
reasons causing that “many of those leaving rural Mexico were
not prepared for good jobs in Mexico or the United States”
• “One hundred indigenous languages or distinct dialects are
spoken in the rural areas of the country and nearly ten percent
of the population, or about nine million of the country
indigenous population, do not speak Spanish”
• “The most obvious public policy solution [to prevent migration]
would be to increase Mexico stock of human capital through
increased funding for education”
MIGRATION AND IMMIGRATION
• The United States has the highest immigration rate in the world.
• “Mexicans constitute the largest immigrant group in the United
States with 27.6 percent. There is no other Diaspora of equal
magnitude in the world”
• “One of the largest migration process in world history has taken
place between Mexico and the United States”
• “Mexicans are the U.S. immigrant group with the greatest industrial
participation and the lowest average income”
• Ten percent of the 120 million people born in Mexico live in the
• “Between 1991 and 2000, some 2.2 million Mexicans were
admitted as legal immigrants and 15 million foreigners, 95 percent
Mexicans, were apprehended just inside the U.S. Border”
• NAFTA was supposed to fix the problem of undocumented Mexican
migration into the United States
• NAFTA, “as a method of reducing undocumented migration failed
• The failure of NAFTA “to fulfil its promise of widespread Mexican
prosperity has also meant continued illegal immigration into the United
States, of both unskilled and skilled workers”
• NAFTA “paid little attention to worker mobility, in striking contrast to the
EU, which made labour central to the broader process of market
• “NAFTA essentially did not deal with migration among the three countries”
• Even Mexico then President, Carlos Salinas de Gortari (as cited in Martin,
2010) asserted that “lowering trade and investment barriers in North
America would allow Mexico „to export goods, not people‟
• ”One of the ideas of NAFTA was creating jobs in Mexico to encourage
Mexicans to stay there.
• “The increase in trade has not translated into more jobs for Mexicans at
home; in fact, NAFTA has resulted in structural changes that encourage
more labour migration from Mexico”
• The real benefit of the agreement came in the form of lower prices rather
than the creation of more job opportunities
• The United States, under NAFTA regulations, created a special kind
of temporary visa for Mexicans and Canadians: TN (Trade NAFTA)
• One-year, renewable increments to high -skilled workers from
Canada and Mexico who are in eligible occupations and have U.S.
• Low-skilled migrants from Mexico or Canada are not benefited by
these temporary work visas.
• Canadians need only supply job documents, proof of citizenship and
a basic application to the immigration officer at any U.S. Port of
• For Mexicans, the process is slightly more complicated and cannot
take place at a port of entry. They have to submit their documents
at a U.S. consulate
ADVANTAGES OF NAFTA
• In 2007, Canada and Mexico were, respectively, the first and second
largest export markets for U.S. agricultural products.
• Exports to the two markets combined were greater than exports to the
next six largest markets combined.
• Agricultural trade increased in both directions(U.S.-Mexico) under NAFTA
from $7.3 billion in 1994 to $20.1 billion in 2006.
• This was an approximately 300% increase in economic activity: Or 25%
year over year growth (12 years).
• From 1992-2007, the value of U.S. agricultural exports worldwide climbed
• Over that same period, U.S. farm and food exports to Mexico and Canada
grew by 156%.
• NAFTA expanded the maquiladora program, which enabled U.S.-owned
companies to employ Mexican workers near the border.
• This allowed for more efficient assembly of manufactured goods and in
turn, increased exports to the U.S.
• This increased Mexico’s labor force by 30%
DISADVANTAGES OF NAFTA
• Some economists argue that NAFTA has been beneficial to business owners and elites in all
three countries, but has had negative impacts on farmers in Mexico who saw food prices fall
based on cheap imports from U.S. agribusiness and negative impacts on U.S. workers in
manufacturing and assembly industries who lost jobs.
• Other economists believe that NAFTA has not been sufficient (or worked fast enough) to
produce economic convergence, nor to substantially reduce poverty rates.
• In addition, some have suggested that in order to fully benefit from the agreement, Mexico
must invest more in education and promote innovation in infrastructure and agriculture.
• Since labor is cheaper in Mexico, many U.S. manufacturing industries moved part of their
production from high-cost states to Mexico.
• Between 1994 and 2002, the U.S. lost approximately 1.7 million jobs while gaining only
794,000 for a net loss of 879,000 jobs.
• These industries included, but were not limited to Agri-businesses.
• NAFTA expanded the maquiladora program, in which U.S.-owned companies employed
Mexican workers near the border to cheaply assemble products for export to the U.S.
• According to The Continental Social Alliance, these workers have; “no labor rights or health
protections, workdays can stretch 12 hours or more, and if you are a woman, you could be
forced to take a pregnancy test when applying for a job."
US EXPORTS WITH NAFTA
• The NAFTA countries (Canada and Mexico), were the top two purchasers
of U.S. exports in 2010. (Canada $248.2 billion and Mexico $163.3 billion).
• U.S. goods exports to NAFTA in 2010 were $411.5 billion, up 23.4% ($78
billion) from 2009, and 149% from 1994 (the year prior to Uruguay Round)
and up 190% from 1993 (the year prior to NAFTA). U.S. exports to NAFTA
accounted for 32.2% of overall U.S. exports in 2010.
• The top export categories (2-digit HS) in 2010 were: Machinery ($63.3
billion), Vehicles (parts) ($56.7 billion), Electrical Machinery ($56.2 billion),
Mineral Fuel and Oil ($26.7 billion), and Plastic ($22.6 billion).
• U.S. exports of agricultural products to NAFTA countries totalled $31.4
billion in 2010. Leading categories include: red meats, fresh/chilled/frozen
($2.7 billion), coarse grains ($2.2 million), fresh fruit ($1.9 billion), snack
foods (excluding nuts) ($1.8 billion), and fresh vegetables ($1.7 billion).
• U.S. exports of private commercial services* (i.e., excluding military and
government) to NAFTA were $63.8 billion in 2009 (latest data available),
down 7% ($4.6 billion) from 2008, but up 125% since 1994.
US IMPORTS WITH NAFTA
• The NAFTA countries were the second and third largest suppliers of goods
imports to the United States in 2010. (Canada $276.5 billon, and Mexico
• U.S. goods imports from NAFTA totalled $506.1 billion in 2010, up 25.6%
($103 billion), from 2009, and up 184% from 1994, and up 235% from
1993. U.S. imports from NAFTA accounted for 26.5% of overall U.S.
imports in 2010.
• The five largest categories in 2010 were Mineral Fuel and Oil (crude oil)
($116.2 billion), Vehicles ($86.3 billion), Electrical Machinery ($61.8
billion), Machinery ($51.2 billion), and Precious Stones (gold) ($13.9).
• U.S. imports of agricultural products from NAFTA countries totalled $29.8
billion in 2010. Leading categories include: fresh vegetables ($4.6 billion),
snack foods, (including chocolate) ($4.0 billion), fresh fruit (excluding
bananas) ($2.4 billion), live animals ($2.0 billion), and red meats,
fresh/chilled/frozen ($2.0 billion).
• U.S. imports of private commercial services* (i.e., excluding military and
government) were $35.5 billion in 2009 (latest data available), down
11.2% ($4.5 billion) from 2008, but up 100% since 1994.
NAFTA’s Broken Promises 1994-2013
U.S. Job Loss, Not Gain
Projections on trade balance, jobs prove wrong
Huge new NAFTA trade deficit emerges
Services and manufacturing export growth
slows under NAFTA
One million American jobs lost to NAFTA
Corporate promises of job creation are broken
Special investor privileges promote off shoring
of American jobs
Decreased Wages, Increased Inequality
Wages decline due to NAFTA
Economic inequality reaches new extremes
Wage losses outweigh cheaper prices under NAFTA
Devastation of American manufacturing erodes the tax base
supports U.S. schools, hospitals and essential infrastructure
Flood of Unsafe Imports
NAFTA undermines safety standards for imported food
Surging food imports overwhelm food inspections
Loss of Family Farms
NAFTA fails to deliver on promises to farmers
Pork and beef suffer under NAFTA
Corporate Attacks on Public Interest Laws
NAFTA grants multinational corporations new privileges and
an extreme enforcement process
Corporate demands for taxpayer compensation surge
NAFTA cases target health laws, environmental regulations
and even the behavior of government officials
NAFTA threatens green jobs programs
Investor-state attacks force costly defense of U.S. policies
The NAFTA Trucks Threat
NAFTA requires access to U.S. roads for trucks without safety
or environmental standards
Obama administration caves to Mexico’s $2.4 billion NAFTA
trade sanctions threat, allows NAFTA trucks to run over safety
and health concerns
Surge in Trade Conflicts
NAFTA partners lead the world in trade pact attacks on the
NAFTA countries challenge U.S. consumer protection rules
NAFTA partners attack label to protect dolphins