PRESENTATION ONREGIONAL TRADE BLOCKSSPECIAL THANKS TO: PRESENTED BYDr. P CHAKRAVARTHI K. NARESH REG NO 7085
Different regional trade blocs. What is NAFTA? The Elimination of Trade Barriers. When is NAFTA Started? Why was NAFTA formed? Advantages. Disadvantages. NAFTA in US Exports. Imports. Trial Balance. Investment.
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S. and Mexico making it the world’s largest free trade area (in terms of GDP). NAFTA was launched 20 years ago to reduce trading costs, increase business investment, and help North America be more competitive in the global marketplace. As of January 1, 2008, all tariffs between the three countries were eliminated. Between 1993-2009, trade tripled from $297 billion to $1.6 trillion.
NAFTA helped to eliminate a number of non-tariff measures affecting agricultural trade between the United States and Mexico. Prior to January 1, 1994, the single largest barrier to U.S. agricultural sales was Mexico’s import licensing system. However, this system was largely replaced by tariff-rate quotas or ordinary tariffs. All agricultural tariffs between Mexico and the United States were eliminated as of January 1, 2008. Many were immediately eliminated and others were phased out over transition periods of 5, 10, or 15 years. The immediate tariff eliminations applied to a broad range of agricultural products. In fact, more than half the value of agricultural trade became duty free when the agreement went into effect. Tariff reductions between the United States and Canada had already been implemented under the CFTA Both Mexico and the United States protected their import-sensitive sectors with longer transition periods, tariff-rate quotas, and, for certain products, special safeguard provisions. However, now that the 15-year transition period has passed, free trade with Mexico prevails for all agricultural products. NAFTA also provides for strict rules of origin to ensure that maximum benefits accrue only to those items produced in North America.
NAFTA was signed by President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the legislatures of the three countries in 1993. The U.S. House of Representatives approved it by 234 to 200 on November 17, 1993. The U.S. Senate approved it by 60 to 38 on November 20, three days later. It was signed into law by President Bill Clinton on December 8, 1993 and entered force January 1, 1994. Although it was signed by President Bush, it was a priority of President Clintons, and its passage is considered one of his first successes.
Article 102 of the NAFTA agreement outlines its purpose: Grant the signatories Most Favored Nation status. Eliminate barriers to trade and facilitate the cross- border movement of goods and services. Promote conditions of fair competition. Increase investment opportunities. Provide protection and enforcement of intellectual property rights. Create procedures for the resolution of trade disputes. Establish a framework for further trilateral, regional and multilateral cooperation to expand NAFTAs benefits.
NAFTA created the world’s largest free trade area. It allows the 450 million people in the U.S., Canada and Mexico to export to each other at a lower cost. As a result, it is responsible for $1.6 trillion in goods and services annually. Estimates are that NAFTA increases the U.S. economy, as measured by GDP, by as much as .5% a year. NAFTA Increased Trade in All Goods and Services Boosted U.S. Farm Exports Created Trade Surplus in Services Reduced Oil and Grocery Prices Stepped Up Foreign Direct Investment
First and foremost, is that NAFTA made it possible for many U.S. manufacturers to move jobs to lower-cost Mexico. The manufacturers that remained lowered wages to compete in those industries. The second disadvantage was that many of Mexicos farmers were put out of business by U.S.-subsidized farm products. NAFTA provisions for Mexican labor and environmental protection were not strong enough to prevent those workers from being exploited. U.S. Jobs Were Lost U.S. Wages Were Suppressed Mexicos Farmers Were Put Out of Business Maquiladora Workers Were Exploited Mexicos Environment Deteriorated NAFTA Called for Free Access for Mexican Trucks
On January 1, 1994, the North American Free Trade Agreement between the United States, Canada, and Mexico (NAFTA) entered into force. Trade between the United States and its NAFTA partners has soared since the agreement entered into force. U.S. goods and services trade with NAFTA totaled $1.6 trillion in 2009 (latest data available for goods and services trade combined). Exports totaled $397 billion. Imports totaled $438 billion. The U.S. goods and services trade deficit with NAFTA was $41 billion in 2009.
The United States has $918 billion in total (two ways) goods trade with NAFTA countries (Canada and Mexico) during 2010. Goods exports totaled $412 billion; Goods imports totaled $506 billion. The U.S. goods trade deficit with NAFTA was $95 billion in 2010. Trade in services with NAFTA (exports and imports) totaled $99 billion in 2009 (latest data available for services trade). Services exports were $63.8 billion. Services imports were $35.5 billion. The U.S. services trade surplus with NAFTA was $28.3 billion in 2009.
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 totaled $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).
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 $229.7 billion). U.S. goods imports from NAFTA totaled $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 totaled $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.
The U.S. goods trade deficit with NAFTA was $94.6 billion in 2010, a 36.4% increase ($25 billion) over 2009. The U.S. goods trade deficit with NAFTA accounted for 26.8% of the overall U.S. goods trade deficit in 2010. The United States had a services trade surplus of $28.3 billion with NAFTA countries in 2009.
U.S. foreign direct investment (FDI) in NAFTA Countries (stock) was $357.7 billion in 2009 , up 8.8% from 2008. U.S. direct investment in NAFTA Countries is in nonbank holding companies, and in the manufacturing, finance/insurance, and mining sectors. NAFTA Countries FDI in the United States (stock) was $237.2 billion in 2009, up 16.5% from 2008. NAFTA countries direct investment in the U.S. is in the manufacturing, finance/insurance, and banking sectors