Nafta Group

8/9/2019 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 disadvantage in the

region, because CA countries have been very

active in negotiating free trade agreements that

do not include the U.S. More than 20 trade

agreements grant preferences in CA to products

from Mexico, Canada, Chile, and several South

American nations.

NAFTA FUTURE


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NAFTA SUPPLEMENTS

The North American Agreement on

Environmental Cooperation NAAEC)

The North American Agreement on Labour

Cooperation NAALC)


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PUBLIC OPINION

Public opinion toward NAFTA in the United States,Canada, and Mexico is mixed. A survey conducted byCIDE and COMEXI in Mexico showed that 64 percent

of the Mexican public favored NAF

TA.

The Program on International Policy Attitudesreported in a poll that 47 percent of Americans

thought that NAF

TA has been good for the UnitedStates, while 39 percent thought it had been bad forthe country .


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CONCLUSION

NAFTA is one of the most successful treaties of the times interms of growth in trade i.e. imports & exports , G.D.P etc. buton the other hand it is also responsible for causalities like loss

of jobs, migration, rising level of inequality and many others.

Thus it is important that the treaty should be carried forwardconcerning about taking steps for the problems originateddue to NAFTA ,otherwise it will create inequality in manyterms which can lead to bad conditions in future for all the

three countries.


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References

http://en.wikipedia.org/wiki/North_American_Free_Tra

de_Agreement

http://www.nafta-sec-alena.org

http://www.export.gov/fta/nafta/doc_fta_nafta.asp

http://www.sice.oas.org/trade/nafta/naftatce.asp

http://www.canadianeconomy.gc.ca/English/economy/1994NAFTA.html


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