North American Trade Agreement (NAFTA)

North American Trade Agreement (NAFTA)

The North American Trade Agreement (NAFTA) was created in order to increase business investment and also reduce trading costs. As a result, NAFTA was created in order to boost North America’s stake in the global marketplace. The agreement was made between the United States, Canada, and Mexico.

In President Ronald Reagan’s 1980 presidential campaign, he proposed a North American common market. He modeled this idea off of the European Economic Community (Europe’s common market) which was initiated in 1957. In 1984, the Trade and Tariff Act was passed by Congress. This Act put an expedited authority to streamline negotiations regarding bilateral free trade agreements. A year later in 1985, the Prime Minister of Canada Brian Mulroney initiated discussion for the Canada/US Free Trade Agreement. After a year of negotiations, it was signed in 1988, going into effect January 1, 1989. This was the ruling agreement until NAFTA replaced it.

In June 1990, Mexico’s President Carlos Salinas de Gortari formally asked the U.S for a free trade agreement. US President George H.W. Bush started negotiating for a liberalized trade agreement among all three countries: Mexico, The United States, and Canada. In 1992, NAFTA was signed.

There were concerns regarding labor and environmental regulations that resulted in two addendums. NAFTA was ratified, signed into law, and took effect in 1994.

Article 102 of the North American Trade Agreement (NAFTA) agreement outlines its purpose. There are seven specific goals:

  1. Grant the signatories (the countries that signed it) a “most-favored-nation” status.
  2. Eliminate barriers to trade and facilitate the cross-border movement of goods and services.
  3. Promote conditions of fair competition.
  4. Increase investment opportunities.
  5. Provide protection and enforcement of intellectual property rights.
  6. Create procedures for the resolution of trade disputes.
  7. Establish a framework for further trilateral, regional, and multilateral cooperation to expand the trade agreement’s benefits.

In 2017, President Donald Trump responded to critics of NAFTA by opening up renegotiations. There were six major problems documented:

  • Loss of U.S. jobs
  • Suppression of U.S. wages
  • Worker exploitation in Maquiladoras
  • Mexico’s farmers being put out of business
  • Not enough environmental protections in Mexico
  • Free U.S. access for Mexican trucks

Due to these concerns, President Trump and Mexico created a new bilateral trade deal to replace NAFTA. They threatened to leave Canada out. On September 30, 2018, Canada joined. A month later an agreement was reached by the three countries. The new agreement is titled  United States-Mexico-Canada Agreement (USMCA). Donald Trump’s administration’s goal was to lower the trade deficit.

NAFTA’s creation indisputably increased trade across North America’s borders. Because trade agreements can become obsolete and administrations change, there is always a possibility for change. The NAFTA to USMCA was an example of how outcomes of trade agreements can be renegotiated and change over time.

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