Nafta Group

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    NAFTA

    North American Free Trade

    Agreement

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    NAFTA Overviews

    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 leaders of the three

    countries:

    Brian Mulroney of Canada. Carlos Salinas de Gortari of Mexico.

    Bill Clinton of the United States.

    Did not come into effect until January 1, 1994.

    As of 2008 the trade bloc is the largest in the world and second largest by

    nominal GDP comparison.

    One of the most powerful, wide-reaching treaties in the world.

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    NAFTA Overviews (conti)

    Fully implemented on January 1, 2008.

    Most successful trade agreements in history. Contributed to significant increases in agricultural trade and

    investment between threes.

    Benefited farmers, ranchers and consumers throughout North

    America.

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    Countries do not have trade at the intersecting point on

    this graph because each is producing less than if they had a comparative

    advantage - producing a good or service at the lowest cost.

    The new line shows the number of goods and/or

    services that can be produced if the two countries specialize in those goods and/or

    services that they have comparative advantage --- consumers can have more of two

    goods at a cheap price.

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    Why NAFTA is Important ?

    Eliminates tariffs.

    Everyone benefits because goods are at a lower cost.

    The most underdeveloped country/partner gains the most - we

    help them develop.

    Economic liberalization.

    Effects :Privatization, less governmental control; Increasedcompetitiveness; Higher specialization resulting in a shifting of

    Sectors (example: Corn in Mexico); Lower costs to consumers

    Believes in freedom from governmental controls and the role of

    the state in protecting those rights. Believes that natural market

    forces should determine economic activity.

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    In 1998, Mexico replaced Japan (which has an

    economy 11 times its size) as the No. 2 trading

    partner with America. In less than 10 years it will

    be nmero uno, replacing Canada.However, 40% of its population lives on less than

    $2 a day.

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    Fox met with President Bush on Sept. 4th and proposed a very broad

    agenda: legalizing anywhere from 3 to 7 million illegal immigrants,

    expanding temporary migration from Mexico, increasing cooperation in law

    enforcement, especially against drug trafficking, and organizing a binational

    committee to promote development in the poorer regions in Mexico.

    A week prior to 9/11, the discussion focused on ways to facilitate integration

    and the movement of people and of goods. On 9/11, the borders were

    virtually shut down. In the immediate term, 9/11 has had a profound effect

    on both Mexico and Canada. Both countries had come to rely on freer trade

    with the United States, with U.S. exports and imports approximately 85% oftheir total trade, and thus any impediments introduced at the borders had a

    very deleterious effect on the two coutries economies.

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    T The following is a listing of goals as set forth

    in NAFTAs preamble:y To strengthen bonds of friendship and

    cooperation

    To act as a catalyst to international

    cooperation

    y To create, expand, and secure future

    markets , To establish fair rules of trade

    y To ensure a predictable framework for

    business planning , To enhance firms

    competitiveness in foreign markets

    y To foster creativity and innovation

    ,create new employment opportunities

    y To promote development & strengthenenvironmental regulations

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    NAFTA IN PERSPECTIVE

    U.S. two-way trade with Canada and Mexicoexceeds U.S. trade with the European Union andJapan combined.

    In fact, US trade more in a month to Mexico thanwith all the other countries in a year. US exportmore to Mexico in a day than with Paraguay in ayear.

    US export more in a week with Canada than withCentral America in a year

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    U.S. TRADE IN PERSPECTIVE 2008

    $301$173

    $35 $54

    129.6196.7

    282.6

    411.8

    $0

    $100

    $200

    $300

    $400

    $500

    $600

    $700

    $800

    NAF A EU(25) C J

    EX R S

    I R S

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    Top Ten Countries with which the U.S. Trades

    174.4

    244.5

    $216.70

    $315.90

    $0

    $100

    $200

    $300

    $400

    $500

    $600

    Cana

    da

    Mexico

    Chin

    a

    Japan

    Germ

    any

    U.K.

    S.Korea

    Taiw

    an

    France

    Malaysia

    I

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    U.S. imports are very labor intensive

    because it is cheaper to import from

    a country with lower wages than

    producing it internally. And since

    Canada is our greatest trading

    partner and Mexico is our third,these import statistics are greatly

    affected by their activity.

    U.S. exports are more

    technologically based and require a

    better educated population to

    produce - a fact that gives the U.S. a

    comparative advantage for these

    types of industries. [Source: 1994

    Census Information]

    U.S. TOP Exports & Imports.

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    EFFECTS OF NAFTA

    BENEFITS

    NAFTA eliminates trade barrier

    Benefits the importers by reduced or duty free goods.

    Can make the exporter more competitive then other non-participatingcountries

    200% increase in trade among the 3 countries.

    Increase market access within each country.

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    EFFECTS OF NAFTA

    LIMITATONS

    It has negative impacts on farmers in Mexico who saw food prices fallbased on cheap imports from U.S. agribusiness

    It has negative impacts on U.S. workers in manufacturing andassembly industries who lost jobs.

    Critics also argue that NAFTA has contributed to the rising levels ofinequality in both the U.S. and Mexico.

    Some economists believe that NAFTA has not been enough (orworked fast enough) to produce an economic convergence, nor tosubstantially reduce poverty rates

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    KEY NAFTA PROVISIONS

    Export Subsidies

    Internal Support

    Grade and Quality Standards

    Rules of Origin

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    Impact on Employment

    The study's indicates that the reduction in net exports to Mexico haseliminated 2,27,663 U.S. job opportunities since 1993, and thereduction in net exports to Canada has eliminated 1,67,172 jobopportunities in the same period. In total, NAFTA resulted in a netloss of 3,94,835 jobs in its first three years.

    The analysis finds that NAFTA has eliminated significant numbers of jobs for women and members of minority groups, as well as whitemales. Between 1993 and 1996, women lost 1,41,454 jobs to NAFTA,

    blacks lost 36,890 jobs, and Hispanics lost 22,520 jobs, numbersclosely reflecting these groups shares in manufacturing industries

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    Impact on Immigration

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    Equivalent of 6 million min. wage jobs

    That money - the nation's third largest source of income, behind oil and

    tourism - has not only provided relatives money for food, clothing andmedicine

    MISSOURI From 1990 to 2000, Missouris Latino population increased by

    92.2%. 40% of this population lives in the West Central region, with 30%

    living in Jackson County

    40 percent of Missouris Latino population lives in the West Centralregion, with 30 percent living in Jackson County

    Impact on Immigration

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    Two agreements.1. One was the North American Agreement on

    Environmental Cooperation (NAAEC), which

    created a commission to enforce environmental

    law. But the commission was not fully staffed

    until 1995 and has had a slow start.

    2. The other agreement created the BorderEnvironment Cooperation Commission and the

    North American Development Bank to address

    pollution problems along the U.S.-Mexican border.

    Currently, NAFTA trade contributes significantly to air

    pollution in all the corridors. Truck idling associated with

    border crossing delay contributes significantly to CO

    emissions, particularly in corridors where border delay isproblematic. As much as 6% of all trade-related CO

    emissions in the corridors are caused by truck idling.

    Impact on Environment

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    Much like the Canadian FTA was expanded to

    NAFTA...

    The negotiation with Central America will

    complement the goal of completing a Free Trade

    with the Americas (FTAA) by Jan. 2005.

    The U.S. exported $9 billion in goods to the five

    Central American countries in 2001, up 42% since1996. The U.S. is the main supplier of goods and

    services to Central American economies: 40% of

    total goods imports by CA come from the U.S. U.S.

    products face a competitive disadvantag