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NAFTA superseded the FTA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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