NORTH AMERICAN FREE TRADE AGREEMENT(NAFTA)

PRESENTED BY

ABHIJIT ROY AKRAM AZAD ALOK KUMAR

AMIT AGARWAL AMIT KUMAR ANIMESH UKIL

ANUSHREE HALDAR BHARAT PATEL

WHAT IS NAFTA?

• 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 presidents of the three countries and it came into effect from 1st Jan. 1994

INTRODUCTION

• NAFTA entered into force on January 1, 1994.

• The final provisions were fully implemented on January 1, 2008.

• NAFTA created the world largest free trade area which now

• links 450 million people producing 17 trillion worth of goods and services.

• “trade between the United States and its NAFTA partners has soared since the agreement entered into force.”

AMENDMENT

• Final provisions (NAFTA) were fully implemented on January 1, 2008.

• NAFTA one of the most successful trade agreements in history and has contributed to significant increases in agricultural trade and investment

• Most comprehensive Regional Trade Agreement signed by the United States

IMPORTANT EVENTS

• January 1989. FTA between the US and Canada goes into effect. Mexico Joins Discussions.

• September 1990. Canada, the United States, and Mexico agree to negotiate a FTA.

• June 1991. Trilateral negotiations between Canada, Mexico, and the United States open in Toronto, Canada.

• August 12, 1992. NAFTA negotiations completed.

• December 17, 1992. President Bush, President Salinas, and Prime Minister Mulroney sign the NAFTA.

• June 30, 1993. US District Court declares that NAFTA will be illegal as the Executive Branch did not conduct a full environmental impact study on the results of the agreement.

• November 18, 1993. US Congress approves NAFTA • November 22, 1993. Mexican congress approves

NAFTA• January 1, 1994. NAFTA implemented.

HISTORICAL CONTEXT• NAFTA is the first agreement “between two industrial countries and a

developing nation• “Canada and Mexico share many common experiences in their historical

relationship to the U.S., including economic and cultural penetration and loss of territory”

• “NAFTA is one of the only truly positive interactions the countries [Mexico and the U.S.] have had since 1821, when Mexico achieved its independence from Spain”

• Mexico had the initiative for the treaty, not the United States• [Mexico] “is Latin America number - one exporter and occupies thirteenth

place worldwide”• [NAFTA] was the “most ambitious trade agreement anywhere in the world

among countries with such extreme differences in income and development but with a geographical proximity that allows integration to take place beyond the trade factor”

• NAFTA would be larger in territory, population, and product than the first fifteen members of the European Union combined

• “There was a fear of job loss and low wages, more damage to struggling U.S. and Canadian economies, and the continued deterioration of the environment among other reasons not to support the agreement”

• Negotiation and signing of NAFTA represents a fascinating recent case of the demise of long - standing policy frontiers

• After ten years after the enactment of NAFTA, “new and larger linkages have emerged in goods and services

• production, there has been reallocation of productive capacities and labour markets have become more integrated

• “A total of 21.9 million new jobs were created in the non agricultural sector during the period of 1994 - 2002, with 16 million in the US, 3.4 million in Mexico, and 2.4 million in Canada”

NAFTA‟S MAIN OBJECTIVES• Eliminate barriers to trade in, and facilitate the cross – border

movement of, goods and services between the territories of the Parties;

• Promote conditions of fair competition in the free trade area; • Increase substantially investment opportunities in the territories of

the Parties; • provide adequate and effective protection and enforcement of

intellectual property rights in each Party's territory; • Create effective procedures for the implementation and application

of this Agreement, for its joint administration and for the resolution of disputes; and

• Establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

NAFTA COUNTRIES AND CULTURAL DIFFERENCES

• “Whether they [nations] are ready for the enormous intercultural challenge this [treaty] implies or not, they will benefit from a culturally sensitive outlook and an honest effort to respect and understand the world from one another ‟respective vantage point”

• “Collaborative efforts can reduce ethnocentrism, make cultural research more applicable, and increase discussion about culture”

• NAFTA is a “pathway to regional integration”• “The cultural differences between Mexicans and Americans are so great

that they are two opposite versions of Western civilization” • Mexico has to overcome more differences than its counterparts.• Language and cultural differences are crucial aspects that “Mexicans

have to face when applying for a job in the United States”• “Workers have an average educational level of 12.6 years in the U.S. and

11.7 years in Canada, the average drops to 6.7 years in the case of Mexico”

EDUCATIONAL CHANGES WITHIN THE NAFTA REGION

• NAFTA is the first FTA that “also includes services and education”• “Appropriate education enables individuals to learn about and respect the

prevailing cultural norms in each country, thereby increasing the possibilities of success in commercial relationships”

• The Consortium for North American Higher Education Collaboration (CONAHEC), is considered a collaborative effort between the U.S. And Mexico.

• CONAHEC is housed at the University of Arizona. • Its mission is “to serve as a bridge of understanding among the higher

education systems and institutions in Canada, Mexico, and the United States and to remove obstacles to academic exchange in North America — working toward academic integration”

• For Mexico, “collaborative efforts translate into improvement of the educational system, which is vital for Mexico economic potential”

• In addition to internal efforts to improve education in Mexico, there are some collaborative efforts between the United States and Mexico which most of them take place on the U.S. - Mexico border

• The U – S -Mexico: “one of the world most urbanized international borders

• The still existing poor educational systems in Mexico are the reasons causing that “many of those leaving rural Mexico were not prepared for good jobs in Mexico or the United States”

• “One hundred indigenous languages or distinct dialects are spoken in the rural areas of the country and nearly ten percent of the population, or about nine million of the country indigenous population, do not speak Spanish”

• “The most obvious public policy solution [to prevent migration] would be to increase Mexico stock of human capital through increased funding for education”

MIGRATION AND IMMIGRATION

• The United States has the highest immigration rate in the world. • “Mexicans constitute the largest immigrant group in the United States with

27.6 percent. There is no other Diaspora of equal magnitude in the world” • “One of the largest migration process in world history has taken place

between Mexico and the United States” • “Mexicans are the U.S. immigrant group with the greatest industrial

participation and the lowest average income”• Ten percent of the 120 million people born in Mexico live in the United

States• “Between 1991 and 2000, some 2.2 million Mexicans were admitted as

legal immigrants and 15 million foreigners, 95 percent Mexicans, were apprehended just inside the U.S. Border”

• NAFTA was supposed to fix the problem of undocumented Mexican migration into the United States

• NAFTA, “as a method of reducing undocumented migration failed miserably” • The failure of NAFTA “to fulfil its promise of widespread Mexican prosperity

has also meant continued illegal immigration into the United States, of both unskilled and skilled workers”

• NAFTA “paid little attention to worker mobility, in striking contrast to the EU, which made labour central to the broader process of market integration”

• “NAFTA essentially did not deal with migration among the three countries” • Even Mexico then President, Carlos Salinas de Gortari (as cited in Martin,

2010) asserted that “lowering trade and investment barriers in North America would allow Mexico „to export goods, not people‟

• ”One of the ideas of NAFTA was creating jobs in Mexico to encourage Mexicans to stay there.

• “The increase in trade has not translated into more jobs for Mexicans at home; in fact, NAFTA has resulted in structural changes that encourage more labour migration from Mexico”

• The real benefit of the agreement came in the form of lower prices rather than the creation of more job opportunities

NAFTA VISAS• The United States, under NAFTA regulations, created a special kind of

temporary visa for Mexicans and Canadians: TN (Trade NAFTA) visa.• One-year, renewable increments to high -skilled workers from

Canada and Mexico who are in eligible occupations and have U.S. job offers

• Low-skilled migrants from Mexico or Canada are not benefited by these temporary work visas.

• Canadians need only supply job documents, proof of citizenship and a basic application to the immigration officer at any U.S. Port of entry

• For Mexicans, the process is slightly more complicated and cannot take place at a port of entry. They have to submit their documents at a U.S. consulate

ADVANTAGES OF NAFTA• In 2007, Canada and Mexico were, respectively, the first and second largest

export markets for U.S. agricultural products. • Exports to the two markets combined were greater than exports to the next six

largest markets combined.• Agricultural trade increased in both directions(U.S.-Mexico) under NAFTA from

$7.3 billion in 1994 to $20.1 billion in 2006.• This was an approximately 300% increase in economic activity: Or 25% year

over year growth (12 years).• From 1992-2007, the value of U.S. agricultural exports worldwide climbed 65%. • Over that same period, U.S. farm and food exports to Mexico and Canada grew

by 156%.• NAFTA expanded the maquiladora program, which enabled U.S.-owned

companies to employ Mexican workers near the border.• This allowed for more efficient assembly of manufactured goods and in turn,

increased exports to the U.S.• This increased Mexico’s labor force by 30%

DISADVANTAGES OF NAFTA• Some economists argue that NAFTA has been beneficial to business owners and elites in all

three countries, but has had negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness and negative impacts on U.S. workers in manufacturing and assembly industries who lost jobs.

• Other economists believe that NAFTA has not been sufficient (or worked fast enough) to produce economic convergence, nor to substantially reduce poverty rates.

• In addition, some have suggested that in order to fully benefit from the agreement, Mexico must invest more in education and promote innovation in infrastructure and agriculture.

• Since labor is cheaper in Mexico, many U.S. manufacturing industries moved part of their production from high-cost states to Mexico.

• Between 1994 and 2002, the U.S. lost approximately 1.7 million jobs while gaining only 794,000 for a net loss of 879,000 jobs.

• These industries included, but were not limited to Agri-businesses.• NAFTA expanded the maquiladora program, in which U.S.-owned companies employed

Mexican workers near the border to cheaply assemble products for export to the U.S.• According to The Continental Social Alliance, these workers have; “no labor rights or health

protections, workdays can stretch 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job."

US EXPORTS WITH NAFTA • The NAFTA countries (Canada and Mexico), were the top two purchasers of U.S.

exports in 2010. (Canada $248.2 billion and Mexico $163.3 billion).• U.S. goods exports to NAFTA in 2010 were $411.5 billion, up 23.4% ($78 billion)

from 2009, and 149% from 1994 (the year prior to Uruguay Round) and up 190% from 1993 (the year prior to NAFTA). U.S. exports to NAFTA accounted for 32.2% of overall U.S. exports in 2010.

• The top export categories (2-digit HS) in 2010 were: Machinery ($63.3 billion), Vehicles (parts) ($56.7 billion), Electrical Machinery ($56.2 billion), Mineral Fuel and Oil ($26.7 billion), and Plastic ($22.6 billion).

• U.S. exports of agricultural products to NAFTA countries totalled $31.4 billion in 2010. Leading categories include: red meats, fresh/chilled/frozen ($2.7 billion), coarse grains ($2.2 million), fresh fruit ($1.9 billion), snack foods (excluding nuts) ($1.8 billion), and fresh vegetables ($1.7 billion).

• U.S. exports of private commercial services* (i.e., excluding military and government) to NAFTA were $63.8 billion in 2009 (latest data available), down 7% ($4.6 billion) from 2008, but up 125% since 1994.

US IMPORTS WITH NAFTA• The NAFTA countries were the second and third largest suppliers of goods

imports to the United States in 2010. (Canada $276.5 billon, and Mexico $229.7 billion).

• U.S. goods imports from NAFTA totalled $506.1 billion in 2010, up 25.6% ($103 billion), from 2009, and up 184% from 1994, and up 235% from 1993. U.S. imports from NAFTA accounted for 26.5% of overall U.S. imports in 2010.

• The five largest categories in 2010 were Mineral Fuel and Oil (crude oil) ($116.2 billion), Vehicles ($86.3 billion), Electrical Machinery ($61.8 billion), Machinery ($51.2 billion), and Precious Stones (gold) ($13.9).

• U.S. imports of agricultural products from NAFTA countries totalled $29.8 billion in 2010. Leading categories include: fresh vegetables ($4.6 billion), snack foods, (including chocolate) ($4.0 billion), fresh fruit (excluding bananas) ($2.4 billion), live animals ($2.0 billion), and red meats, fresh/chilled/frozen ($2.0 billion).

• U.S. imports of private commercial services* (i.e., excluding military and government) were $35.5 billion in 2009 (latest data available), down 11.2% ($4.5 billion) from 2008, but up 100% since 1994.

NAFTA’s Broken Promises 1994-2013

U.S. Job Loss, Not Gain Projections on trade balance, jobs prove wrong Huge new NAFTA trade deficit emerges Services and manufacturing export growth slows under NAFTA One million American jobs lost to NAFTA Corporate promises of job creation are broken Special investor privileges promote off shoring of American jobs

Decreased Wages, Increased Inequality Wages decline due to NAFTA Economic inequality reaches new extremes Wage losses outweigh cheaper prices under NAFTA Devastation of American manufacturing erodes the tax base

that supports U.S. schools, hospitals and essential infrastructure

Flood of Unsafe Imports NAFTA undermines safety standards for imported food Surging food imports overwhelm food inspections

Loss of Family Farms NAFTA fails to deliver on promises to farmers Pork and beef suffer under NAFTA

Corporate Attacks on Public Interest Laws NAFTA grants multinational corporations new privileges and an

extreme enforcement process Corporate demands for taxpayer compensation surge NAFTA cases target health laws, environmental regulations and

even the behavior of government officials NAFTA threatens green jobs programs Investor-state attacks force costly defense of U.S. policies

The NAFTA Trucks Threat NAFTA requires access to U.S. roads for trucks without safety

or environmental standards Obama administration caves to Mexico’s $2.4 billion NAFTA

trade sanctions threat, allows NAFTA trucks to run over safety and health concerns

Surge in Trade Conflicts NAFTA partners lead the world in trade pact attacks on the

United States NAFTA countries challenge U.S. consumer protection rules NAFTA partners attack label to protect dolphins

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