NAFTA

The North American Free Trade Agreement (NAFTA), which built on the 1989
U.S.-Canada Free Trade Agreement (CFTA), is the most comprehensive regional free
trade agreement ever negotiated. It created the world’s largest free trade area:
380 million people producing nearly $8 trillion dollars worth of goods and
services. On January 1, 1994 the North American Free Trade Agreement entered
into force. One of the main objectives of the Agreement is the elimination of
tariffs between Canada, Mexico and the United States on “qualifying”
goods by the year 1998 for originating goods from Canada and for originating
goods from Mexico by the year 2008. Positive Effects on NAFTA Growth in Trade:
A+ Total North American trade increased from $293 billion in 1993 to $420
billion in 1996, a gain of $127 billion or 43 percent during NAFTA’s first three
years. Mexico and Canada purchased $3 of every $10 in U.S. exports and supplied
$3 of every $10 in U.S. imports in 1996. Growth in U.S. Exports: A+ Thanks to
NAFTA, Mexican tariffs?which had averaged 10 percent before the trade
agreement was implemented?now average less than 6 percent, while average U.S.

tariffs have fallen from 4 percent to about 2.5 percent. As a result, U.S.

exports to Mexico grew by 37 percent from 1993 to 1996, reaching a record $57
billion.3 During this period, U.S. exports to Canada also increased by 33
percent, to $134 billion. Total two-way trade between the United States and
Canada was $290 billion in 1996, while total two-way trade between the United
States and Mexico was nearly $130 billion. Moreover, U.S. market share in Mexico
increased from 69 percent of total Mexican imports in 1993 to 76 percent in
1996. During NAFTA’s first three years, 39 of the 50 states increased their
exports to Mexico; moreover, 44 states reported a growth in exports to Mexico
during 1996 as the pace of U.S. exports to that country accelerated. NAFTA has
shattered the myth that U.S. trade deficits destroy U.S. jobs. The combined U.S.

trade deficit with Canada and Mexico increased during the first three years of
NAFTA’s implementation?from $9 billion in 1992 to $39.9 billion in
1996?because Canada and Mexico suffered economic recessions. U.S. exports to
NAFTA countries currently support 2.3 million U.S. jobs. The largest post-NAFTA
gains in U.S. exports to Mexico have been in such high-technology manufacturing
sectors as transportation and electronic equipment, industrial machinery,
plastics and rubber, fabricated metal products, and chemicals. NAFTA has
encouraged U.S. and foreign investors with apparel and footwear factories in
Asia to relocate their production operations to Mexico. U.S. Compliance with
NAFTA: B In December 1995, the Clinton Administration postponed indefinitely the
implementation of a NAFTA deadline to allow Mexican trucks to circulate in the
southwest United States. U.S.-Mexico Trade Relations: B President Clinton’s
first official trip to Mexico this month came at a time in which relations
between the two countries were at their lowest point in years. The trade and
investment growth achieved during NAFTA’s first three years has been eclipsed by
the peso crisis and political turmoil in Mexico and by growing bilateral
tensions over drug control policy, immigration, and the Helms-Burton Act’s
tightening of economic sanctions against Cuba. These tensions in U.S. Mexico
relations have surfaced because the Clinton Administration did not assign a
sufficiently high priority to Mexico during its first term in office. NAFTA,
however, was never intended to be anything other than a free trade agreement?a
three-way pact by the United States, Mexico, and Canada to eliminate all tariff
and non-tariff barriers to trade over a period of 10 to 15 years. NAFTA was
designed to encourage faster growth in North American trade and investment,
which it has been doing successfully since January 1, 1994. Reform Process in
Mexico: A One of NAFTA’s important achievements has been to “lock in”
the process of economic and political reform under way in Mexico for the past
decade. Mexico’s membership in NAFTA, the World Trade Organization, the
Asia-Pacific Economic Cooperation forum, and the Organization for Economic
Cooperation and Development has created international commitments and linkages
that it cannot ignore. Even though The Heritage Foundation’s 1997 Index of
Economic Freedom still accords Mexico a ranking of 3.35, or “Mostly Not
Free,”12 Mexico has become a more democratic country since NAFTA was
implemented. Negative Effects on NAFTA On the Mexican Side: Pa?l Picard del
Prado, president of the Food Board at the National Manufacturing Industry
Chamber (Canacintra), says the first five years of the North American Trade
Agreement (Nafta) have been good for Americans, but not for Mexicans. Meanwhile,
assembly plants that