North American Free Trade Agreement (NAFTA)

Background
The North American Free Trade Agreement (NAFTA), signed by Prime Minister Brian Mulroney, Mexican President Carlos Salinas, and U.S. President George H.W. Bush, came into effect on January 1, 1994. Since 1993, NAFTA has generated economic growth and rising standards of living for the people of all three member countries. By strengthening the rules and procedures governing trade and investment throughout the continent, NAFTA has proved to be a solid foundation for building Canadas future prosperity. In January 1994, when Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA), the world's largest free trade area was formed. The Agreement has brought economic growth and rising standards of living for people in all three countries. In addition, NAFTA has established a strong foundation for future growth and has set a valuable example of the benefits of trade liberalization.Foreign Affairs and

International Trade Canada

international.gc.ca

Rules of Origin
What are the NAFTA rules of origin?
Each NAFTA country retains its external tariffs vis--vis non-members' goods and levies a lower tariff on the goods "originating" from the other NAFTA members. Rules of origin provide the basis for customs officials to make determinations about which goods are entitled preferential tariff treatment under the NAFTA. Negotiators of the agreement sought to make the NAFTA's rules of origin very clear so as to provide certainty and predictability to producers, exporters and importers. They also sought to ensure that the NAFTA's benefits are not extended to goods exported from non-NAFTA countries which have undergone only minimal processing in North America. The NAFTA rules of origin are included in Chapter Four of the Agreement.

Amendments
Amendments to Annex 401 (September 1, 2009) On September 1, 2009 Canada implemented measures to amend some of the product specific NAFTA rules of origin. Mexico implemented these same amendments on October 1, 2009, and the United States on October 2, 2009. These rules are used to determine whether a good is eligible for preferential treatment under the NAFTA. The amendments liberalize the rules of origin applicable to agricultural, consumer, industrial, mineral fuel and oil products, representing over US$140 billion in annual trilateral trade.

The product specific rules of origin for NAFTA are contained in Annex 401 amended September 1, 2009\

Amendments to Appendix 6, Annex 300-B (July 1, 2009) On July 1, 2009, Canada and the United States implemented measures to liberalize the NAFTA rules of origin applicable to certain textile goods which are made from acrylic staple fibres, that are not available from domestic producers in commercial quantities the so-called short-supply goods.

List of Amendments to Annex 401 (July 1, 2006) On July 1, 2006, Canada and the U.S. implemented measures to liberalize some of the product specific NAFTA rules of origin. On July 5, 2006, Mexico implemented these same measures. These rules are used to determine whether a good is eligible for preferential treatment under the NAFTA. The amendments liberalize the rules of origin applicable to cocoa preparations, cranberry juice, ores, slag and ash, leather, cork, certain textile products, feathers, glass and glassware, copper and other metals, televisions and automatic regulating or controlling instruments.

Institutions of NAFTA
The Free Trade Commission
The Free Trade Commission, which consists of cabinet-level representatives from the three member countries, is the central institution of NAFTA. The Commission convenes annually and is chaired successively by each Party. The Commission supervises the implementation and further elaboration of the Agreement and helps to resolve disputes arising from its interpretation. It also oversees the work of the NAFTA Committees, Working Groups and other subsidiary bodies.

NAFTA Co-ordinators
Day-to-day management of the NAFTA work program, and of the implementation of the Agreement more broadly, is carried out by NAFTA "Coordinators" - the three senior trade department officials designated by each country.

Committees / Working Groups

NAFTA envisages further work towards fulfilling the objectives of the free trade agreement. Under the auspices of NAFTA, over 30 Working Groups, Committees and other subsidiary bodies have been established to facilitate trade and investment and to ensure the effective implementation and administration of NAFTA. Key areas where this work is being undertaken include trade in goods, rules of origin, customs, agricultural trade and subsidies, standards, government procurement, investment and services, cross-border movement of business people, and alternative dispute resolution. NAFTA Working Groups and Committees also help to smooth the implementation of the Agreement and provide forums for exploring ways of further liberalizing trade between members, for example the two rounds of accelerated tariff removals completed under the auspices of the Committee on Trade in Goods. NAFTA Working Groups and Committees also provide an apolitical arena for the discussion of issues and, through early dialogue on contentious points, the possible avoidance of disputes. Canada has made a priority of strengthening the NAFTA work program to enhance the transparency, accountability and effectiveness of NAFTA Working Groups and Committees. You will find the list of Canadian leads and contacts for the Working Groups on the NAFTA website. Political direction for the NAFTA work program is provided by Ministers through the NAFTA Commission. In addition, NAFTA Deputy Ministers of Trade meet twice annually to provide high-level oversight of the NAFTA Working Groups and Committees.

NAFTA Secretariat
The NAFTA Secretariat, comprising the Canadian, U.S. and Mexican Sections, was created by NAFTA pursuant to Article 2002. It is responsible for the administration of the dispute settlement provisions of the Agreement. More specifically, the NAFTA Secretariat administers the NAFTA dispute resolution processes under Chapters Fourteen, Nineteen and Twenty of NAFTA and has certain responsibilities related to Chapter Eleven dispute settlement provisions. Each National Section maintains a court-like registry relating to panel, committee and tribunal proceedings. The NAFTA Secretariat also maintains a trinational website on which updated information on active and completed NAFTA Chapters 19 and 20 disputes is available. The mandate of the NAFTA Secretariat also includes the provision of assistance to the Commission and support for various non-dispute-related Committees and Working Groups.
Why Was NAFTA Formed i.e its purpose 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 NAFTA's benefits.

(Source: NAFTA Secretariat, "NAFTA FAQ") http://useconomy.about.com/od/tradepolicy/p/NAFTA_Advantage.htm http://www.referenceforbusiness.com/encyclopedia/Mor-Off/North-American-Free-Trade-AgreementNAFTA.html#b

BENEFITS
NAFTA Increased Trade in All Goods and Services: Trade between the NAFTA signatories more than quadrupled, from $297 billion in 1993 to $1.6 trillion in 2009 (latest data available). Exports from the U.S. to Canada and Mexico grew from $142 billion to $452 billion in 2007, then declined to $397 billion in 2009, thanks to the 2008 financial crisis. Exports from Canada and Mexico to the U.S. increased from $151 billion to $568 billion in 2007, then down to $438 billion in 2009. (Source: Office of the US Trade Representative, NAFTA) Boosted U.S. Farm Exports: Thanks to NAFTA, agricultural exports to Canada and Mexico grew from 22% of total U.S. farm exports in 1993 to 30% in 2007. To put this into perspective, agricultural exports to Canada and Mexico were greater than exports to the next six largest markets combined. Exports to the two countries nearly doubled, growing 156% compared to a 65% growth to the rest of the world. (Source: U.S. Foreign Agricultural Service, NAFTA) NAFTA increased farm exports because it eliminated high Mexican tariffs. Mexico is the top export destination for U.S.-grown beef, rice, soybean meal, corn sweeteners, apples and beans. It is the second largest export destination for corn, soybeans and oils. (Source: USTR,NAFTA Facts, March 2008) Created Trade Surplus in Services: More than 40% of U.S. GDP is services, such as financial services and health care. These aren't easily transported, so being able to export them to nearby countries is important. NAFTA boosted U.S. service exports to Canada and Mexico from $25 billion in 1993 to $106.8 billion in 2007, which dropped to $63.5 billion in 2009 (latest data available). Imports of services from the two countries were only $35 billion.

NAFTA eliminates trade barriers in nearly all service sectors, which are often highly regulated. NAFTA requires governments to publish all regulations, lowering hidden costs of doing business.

Reduced Oil and Grocery Prices: The U.S. imported $116.2 billion in oil from Mexico and Canada as shale oil (down from $157.8 billion in 2007). This also reduces U.S. reliance on oil imports from the Middle East and Venezuela. It is especially important now that the U.S. no longer imports oil from Iran. Why? Mexico is a friendly country, whereas Venezuela's president often criticizes the U.S. Both Venezuela and Iran have started selling oil in currencies other than the dollar, contributing to the decline in the dollar's value. Since NAFTA eliminates tariffs, oil prices are lower. The same is true for food imports, which totaled $29.8 billion in 2010 (up from $28.9 billion in 2009). Without NAFTA, prices for fresh vegetables, chocolate, fresh fruit (except bananas) and beef would be higher. (Source: USTR,NAFTA Imports) Stepped Up Foreign Direct Investment: Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico more than tripled to $357 billion in 2009, up from $348.7 billion in 2007. Canadian and Mexican FDI in the U.S. grew to $237.2 billion, up from $219.2 billion in 2007. That means this much investment poured into U.S. manufacturing, finance/insurance, and banking companies. NAFTA reduces investors' risk by guaranteeing they will have the same legal rights as local investors. Through NAFTA, investors can make legal claims against the government if it nationalizes their industry or takes their property by eminent domain. (Source: USTR, NAFTA Section Index) (Article updated February 2, 2012)

Disadvantages:
NAFTA has many disadvantages. 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 Mexico's 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: Since labor is cheaper in Mexico, many manufacturing industries moved part of their production from high-cost U.S. states. Between 1994 and 2010, the U.S. trade deficits with Mexico totaled $97.2 billion, displacing 682,900 U.S. jobs. (However, 116,400 occurred after 2007, and could have been a result of the financial crisis.) Nearly 80% of the losses were in manufacturing. California, New York, Michigan and Texas were hit the hardest because they had high concentrations of the industries that moved plants to Mexico. These industries included motor vehicles, textiles, computers, and electrical appliances. (Source: Economic Policy Institute, "The High Cost of Free Trade," May 3, 2011)

U.S. Wages Were Suppressed: Not all companies in these industries moved to Mexico. The ones that used the threat of moving during union organizing drives. When it became a choice between joining the union or losing the factory, workers chose the factory. Without union support, the workers had little bargaining power. This suppressed wage growth. Between 1993 and 1995, 50% of all companies in the industries that were moving to Mexico used the threat of closing the factory. By 1999, that rate had grown to 65%. Mexico's Farmers Were Put Out of Business: Thanks to NAFTA, Mexico lost 1.3 million farm jobs. The 2002 Farm Bill subsidized U.S. agribusiness by as much as 40% of net farm income. When NAFTA removed tariffs, corn and other grains were exported to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers from 33.2% of total farm income in 1990 to 13.2% in 2001. Most of those subsidies went to Mexico's large farms, anyway.(Source: International Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003; The Economist, Tariffs and Tortillas, January 24, 2008) Maquiladora Workers Were Exploited: 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. This grew to 30% of Mexico's labor force. These workers have "no labor rights or health protections, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job," according to Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA, April 20, 2001) Mexico's Environment Deteriorated: In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more marginal land, resulting in deforestation at a rate of 630,000 hectares per year. (Source: Carnegie Endowment, NAFTA's Promise and Reality, 2004) NAFTA Called for Free Access for Mexican Trucks: Another agreement within NAFTA has not been implemented. NAFTA would have allowed trucks from Mexico to travel within the United States beyond the current 20-mile commercial zone limit. A demonstration project by the Department of Transportation (DoT) was set up to review the practicality of this. In 2008, the House of Representatives terminated this project, and prohibited the DoT from allowing this provision of NAFTA to ever be implemented without Congressional approval. Congress was concerned that Mexican trucks would have presented a road hazard. They are not subject to the same safety standards as U.S. trucks. In addition, this portion of NAFTA was opposed by the U.S. truckers' organizations and companies,

who would have lost business. Currently, Mexican trucks must stop at the 20-mile limit and have their goods transferred to U.S. trucks.

There was also a question of reciprocity. The NAFTA agreement would also have allowed unlimited access for U.S. trucks throughout Mexico. A similar agreement works well between the other NAFTA partner, Canada. However, U.S. trucks are larger and carry heavier loads. This violates size and weight restrictions imposed by the Mexican government. (Article updated February 2, 2012)

http://useconomy.about.com/od/tradepolicy/p/NAFTA_Problems. htm

Unemployment increased under NAFTA (Chris Hondros/Getty Images) Ads

http://www.ontheissues.org/2008/barack_obama_free_trade.htm

Nafta and Obama

Obama Signs 3 Trade Deals, Biggest Since NAFTA Published October 21, 2011

Associated Press

October 21: President Barack Obama speaks in the Oval Office of the White House. From left are, Deputy Labor Secretary Seth Harris, Labor Secretary Hilda Solis, US Trade Representative Ron Kirk, Rep. Dave Camp, R-Mich., and United Steelworkers Vice President Thomas Conway. (AP)

President Obama signed off Friday on the first three -- and possibly last -- free trade agreements of his administration, deals with South Korea, Colombia, and Panama that could be worth billions to American exporters and create tens of thousands of jobs. The three deals were years in the making, and the difficulty of bringing them to fruition make it unlikely there will be another bilateral trade agreement during Obama's current term. The agreements will bring to 20 those countries that have free trade relations with the United States. Trade won't go away as an issue, as the administration pushes ahead with a major Pacific rim trade pact, Congress and the White House scuffle over China, and Republicans take aim at Obama's policies during the presidential campaign. http://www.foxnews.com/politics/2011/10/21/obama-signs-3-trade-deals-biggest-since-nafta/#ixzz2EIgrqIGa