North American Free Trade Agreement (NAFTA)

On August 12, 1991 the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA) and on January 1, 1994 went into effect.  Although, free trade was already in practice since 1989 between the U.S, Canada, and Mexico the free trade agreement broadened the arrangements between the three nations.  At that time NAFTA made the three countries the largest free market in the world, directly affecting $6 trillion and 345 million people. NAFTA was brought into law in order to end tariff barriers to agricultural, manufacturing, and services trade. NAFTA removed investment restrictions, offered protection to intellectual property, and bright to light environmental and labor concerns. Small business were expected to experience huge benefits from NAFTA since lowering trade barriers would make it easier to do business with Mexico and Canada.

Major Point of NAFTA

  • Elimination of Tariffs for qualifying products. There was a tariff charge imbalance and NATFA would eliminate it over 15 years. Once in effect 50% of the tariffs were eliminated immediately.
  • Elimination of nontariff barriers by 2008. This includes opening the border and interior of Mexico to U.S. truckers and streamlining border processing and licensing requirements.
  • Establishment of standards on health, safety, and industrial standards to the highest existing standards among the three countries. Standards could no longer be used as a barrier to free trade. The speed of export-product inspections and certifications was also improved.
  • Supplemental agreements to insure that countries would not take advantage of one another’s opportunities and weaknesses.
  • Tariff reduction for motor vehicles and auto parts and automobile rules of origin.
  • Expanded telecommunications trade.
  • Reduced textile and apparel barriers.
  • More free trade in agriculture.
  • Expanded trade in financial services.
  • Opening of insurance markets.
  • Increased investment opportunities.
  • Liberalized regulation of land transportation.
  • Increased protection of intellectual property rights
  • Expanded the rights of American firms to make bids on Mexican and Canadian government contracts

No state, provincial, or local governments could impose taxes or tariffs on those goods. In addition, customs duties were either eliminated at the time of the agreement or scheduled to be phased out in five or 10 equal stages. All remaining duties were eliminated on January 1, 2008 as scheduled. Trade among the countries is extremely high. Today NAFTA is a trading platform of 450 million people and $17 trillion.






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