NORTH AMERICAN FREE

TRADE AGGREMENT

NAFTA

AN INTRODUCTIONAN INTRODUCTION

• Secretariats - Mexico City, Ottawa and Washington, D.C.

• Official languages - English, French and Spanish

• Membership - Canada, Mexico, United States

• Establishment - Formation1 January 1994 

• Area - Total21,783,850 km² (1st)

• Population - 2008 estimate445,335,091 (3rd) - 

• GDP 2007 estimate - Total$15,857 billion (1st) -

• The North American Free Trade Agreement (NAFTA ) is 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, and Bill Clinton of the United States but did not come into effect until January 1, 1994.

o In terms of combined purchasing power parity GDP of its members, as of 2007 the trade bloc is the largest in the world and second largest by nominal GDP comparison.

o It also is one of the most powerful, wide-reaching treaties in the world.

NAFTA SUPPLEMENTSNAFTA SUPPLEMENTS• The North American Free Trade Agreement (NAFTA) has two

supplements:-

the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement

on Labour Cooperation (NAALC)

• (NAAEC) was a response to environmentalists' concerns that the United States would lower its standards if the three countries did not achieve consistent environmental regulation.

• (NAALC) supplements NAFTA and endeavors to create a foundation for cooperation among the three countries for the resolution of labour problems, as well as to promote greater cooperation among trade unions and social organizations in order to fight for improved labor conditions.

PUBLIC OPINION

• Public opinion toward NAFTA in the United States, Canada, and Mexico is mixed.

• A survey conducted by CIDE and COMEXI in Mexico showed that 64 percent of the Mexican public favored NAFTA.

• The Program on International Policy Attitudes reported in a poll that 47 percent of Americans thought that NAFTA has been good for the United States, while 39 percent thought it had been bad for the country

RECENT NAFTA NEWS

NAFTA Toll-Highway Destroying Prime Agricultural Land

• The Trans-Texas Corridor (TTC) is no ordinary highway. The toll road would be four football fields wide.

• It includes separate lanes (up to six for automobiles, four for large trucks), plus tracks for freight trains, separate tracks for high-speed and commuter rail, also space for oil and gas pipelines, electricity wires, and broadband transmission cables.

• The implications of this scheme are staggering.

• Some experts say that up to a million people in Texas stand to lose their homes and 584,000 acres of rich farm and ranchland are to be destroyed, all for a privately funded highway.

CONCLUSIONCONCLUSION

• NAFTA is one of the most successful treaties of the times in terms of growth in trade i.e. imports & exports , G.D.P e.t.c

• but on 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 forward concerning about taking steps for the problems originated due to NAFTA ,

• otherwise it will create inequality in many terms which can lead to bad conditions in future for all the three countries.

SAFTA: SAFTA: Negotiating Negotiating status and status and EvaluationEvaluation

IntroductionIntroduction

• SAFTA was signed in 2004 in Islamabad• Tariff liberalisation implemented on July 1st 2006• Several issues remain which threaten the success

of the agreement: Sensitive lists, NTBs, TLP, BTAs.

Tariff Liberalisation Tariff Liberalisation ProgramProgram

• The TLP stipulates 0-5% tariffs for Non-LDCs by 2013 (SL 2014), LDCs 2016

• Danger of SAFTA losing relevance due to competing RTA/BTAs

• Article 7.2 allows countries wishing to move faster to do so unilaterally

• Better approach to include fast track for heavily traded goods in SAARC

TLPTLPCountries Existing Tariff

RatesTariff rates proposed under

saftaYear to be completed

First Phase India, Pakistan & Sri Lanka20% & above 20% (Max) 2008

Below 20% Annual reduction of 10% 2008

Bangladesh, Bhutan, Maldives & Nepal 30% & above 30% (Max) 2008

Below 30% Annual reduction of 5% 2008

Second Phase

India & Pakistan20% or below 0-5% 2013

Sri Lanka20% or below 0-5% 2014

Bangladesh, Bhutan, Maldives & Nepal 30% or below 0-5% 2016

India and PakistanIndia and Pakistan• Pakistan trade with India based on a specified

positive list• Economic and political reasons for concerns about

altering the status quo• India feels +ve list is against the spirit of the

agreement• Potential for improvement in political relations

through SAFTA

Sensitive ListsSensitive Lists• Article 7.3(b) recommends that the sensitive list

be reviewed every 4 years• This time frame possibly too long given the size

of SLs in SAFTA• Should adopt progressive reduction of SL a la

ASEAN FTA

Table 5: Trade Restriction under SAFTA

Value of Imports from SAARC Subject to NL (%)

Value of Exports to SAARCSubjects to NLs (%)

Bangladesh 65.0 22.0

India 38.4 56.6

Maldives 74.5 57.6

Nepal 64.0 46.4

Pakistan 17.2 34.0

Sri Lanka 51.7 47.0

Total 52.9

Source: Calculated using WITS data.

Table 4: Bilateral Trade Restriction under SAFTA

Bangladesh India Maldives Nepal Pakistan Sri Lanka

% of imports under NL

Bangladesh 11.2 0.0 29.7 31.3 45.2

Bhutan 69.4 36.8 0.0 15.0 50.4 0.0

India 66.0 65.2 64.2 14.5 53.5

Maldives 72.9 3.6 0.0 0.0 59.2

Nepal 87.8 46.2 0.0 25.4 17.6

Pakistan 54.5 16.4 15.5 30.0 28.4

Sri Lanka 66.6 41.5 85.4 37.6 29.7

Source: Calculated using WITS data.

Non-tariff BarriersNon-tariff Barriers• Increasingly important as tariffs fall• Over-regulation – safety standards, other

safeguards• Entry point restrictions• Bureaucratic processes• Customs procedures • Delays in transit due to border issues• No mechanism to reduce NTBs – recent

discussion to include notification

Transaction CostsTransaction Costs• South Asia plagued by transaction costs• Trade facilitation increasingly important

for modern trade, benefits resonate beyond SAFTA

• SAFTA agreement has extensive list of TF measures without binding commitments

• TF measures have high fixed costs, benefits felt in medium-long run, thus little political will to implement

Trade FacilitationTrade Facilitation• More prudent to identify few key measures

producing tangible benefits in SR• Simplify and harmonize customs operation• Transit simplification• Standards Harmonization• Binding commitments for implementation

and S&DT for LDCs required.• Additional measures to be progressive

Dispute Settlement Dispute Settlement MechanismMechanism

• Yet to determine operationalisation of DSM• SAFTA DSM too long, 330 days. ASEAN

290, MERCOSUR 265, NAFTA 310• Excess time in 1st stage, accused can

delay consultations by a month• Time allowed for compliance 90 days in

SAFTA. 30 days in ASEAN, MERCOSUR

DSMDSM• Length of DSM attributed to LDC

requirements.• Better to use differentiated time periods

for LDCs and Non-LDCs• Voting on consensus basis, problematic

considering heterogeneity of interests• Consensus to block or simple majority

system are alternatives to consensus basis

Inclusion of ServicesInclusion of Services• Contribution of services’ value added to

GDP is 40 % in South Asia• Important to ensure this sector does not

forego benefits of liberalisation• Identify complementarities and liberalise• Telecom & IT• Aviation• Medical services• Education

Inclusion of ServicesInclusion of Services• Tourism• Couple services with economic

cooperation to extend benefits to LDCs• Possible 3+x formula, • Lessons from CEPA, progressive,

sequential liberalisation. Building services database.

• Study on inclusion of services in SAFTA is ongoing.

Table 7: Volume of Intra-SAARC Trade (2004)

Share of SAARC Trade in Total Trade of

Country

Share of Trade with India in Total Trade of

Country

Bangladesh 11.2 10.1

India 3.0 -

Maldives 19.8 8.7

Nepal 41.7 41.2

Pakistan 3.3 2.0

Sri Lanka 15.1 13.3

Source: IMF, Direction of Trade Statistics, Yearbook, 2005.