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North American Free Trade Agreement
NAFTA
Joel MosherGary WilliamsMichael Hatch
What is NAFTA?
Agreement between Canada, Mexico, and the United States
Largest trade bloc in the world
NAFTA has two main supplements◦ North American Agreement on Environmental
Cooperation (NAAEC)◦ North American Agreement on Labor Cooperation
(NAALC)
NAFTA’s Origin
Canada – U.S. Free Trade Agreement (1988)
Began negotiations with Mexico soon after
World climate at the time encouraged large, expanding trade blocs
The United States, Mexico, and Canada “ceremonially” signed NAFTA on Dec. 17th 1992
George H. W. Bush was unable to finish NAFTA and passed it to Bill Clinton
Clinton added several clauses
House of Representatives approved in November 1993 (234 – 200)
Senate approved soon after (61 – 38) President Clinton signed it into law on December
8th 1993 NAFTA went into effect on January 1st, 1994
What are the basic goals of NAFTA?
Eliminate trade and investment barriersCreate an expanded safe market in N.A.Establish trade rulesDevelop and expand world trade Improve working conditions in N.A.
Why should you care?
Average American consumers are affected by international trade everyday
Without “free” or “open” trade, product costs will often be more expensive
Possible employment issues that are linked by some to NAFTA
NAFTASuperhighway
NAFTA’s EFFECT ON THE AUTOMOBILE
INDUSTRY
UNITED STATES NAFTA was envisioned with the end goal for the
U.S. of being used as a catalyst to allow the U.S. to export automobiles to Mexico and Canada
Reality is that NAFTA achieved the opposite effect for the U.S. Automobile Industry
Many manufacturers of components used in the final assembly of automobiles were destroyed by an influx of lower priced materials coming from other nations that benefited from NAFTA much more than the U.S.
MEXICO
A positive overall impact on the Mexican auto industry
One of NAFTA’s most important effects on the Mexican auto industry: maintaining high levels of investment
NAFTA had a buffer effect on Mexico’s auto production
CANADABENEFITS:
Increases in oil exports to the U.S.
U.S. investment in automotive production
Increases in shipments of agricultural, beef, wood and paper products to the U.S.
Export of mineral and mining products, which have fared well in U.S. markets
Canada and the U.S. serve as the largest market for each other's goods
The U.S.-Canada Free Trade Agreement went into effect in 1989
NAFTA superseded the FTA
Almost one-third of U.S.-Canadian trade is in the automotive sector
Klier, T. (2005). Determinants of Supplier Plant Location: Evidence from the Auto Industry. 2+.
Studer, I., Notes on NAFTA and the Auto Industry, http://wehner.tamu.edu/mgmt.www/NAFTA/spring99/itam_auto.htm
Barufaldi, D., NAFTA's Winners and Losers, http://www.investopedia.com/articles/economics/08/north-american-free-trade-agreement.asp
U.S. Department of State http://www.umsl.edu/services/govdocs/backgroundnotes/57.htm
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