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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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