Why Was The North American Free Trade Agreement Created

NAFTA allows your company to send qualified goods to customers in Canada and Mexico duty-free. Goods can be challenged in different ways depending on NAFTA`s rules of origin. This may be because the products are fully obtained or manufactured in a NAFTA party, or because, according to the product`s rule of origin, it takes enough work and equipment in a part of NAFTA to make the product what it is when it is exported. The North American Free Trade Agreement (NAFTA) was a three-country agreement negotiated by the governments of Canada, Mexico and the United States, which came into force in January 1994. NAFTA eliminated most tariffs on goods traded between the three countries, with a focus on trade liberalization in agriculture, textiles and automobiles. The agreement also aimed to protect intellectual property, establish dispute resolution mechanisms and implement labour and environmental protection measures through ancillary agreements. According to a report by the New York City public tank report, Council on Foreign Relations (CFR), bilateral agricultural trade tripled between 1994 and 2017 and is considered one of the main economic effects of NAFTA on trade between the United States and Canada, with Canada becoming the largest importer of U.S. agricultural sectors. [64] Fears of job losses in the U.S. manufacturing sector were not due to the fact that manufacturing employment remained “stable”.

Given Canada`s labour productivity, which rose to 72% of the U.S. level, hopes of closing the “productivity gap” between the two countries were also not realized. [64] As a result of NAFTA, Canada recorded a more modest increase in trade with the United States than Mexico, with 63.5% adjusted for inflation (trade between Canada and Mexico remains negligible). Unlike Mexico, it has no trade surplus with the United States. While it sells more goods in the United States than it buys, a large trade deficit in the services sector with its southern neighbour brings the total balance to $11.9 billion in 2015. Instead, the number of Mexican immigrants more than doubled, again between 1990 and 2000, when it approached 9.2 million. According to Pew, the river has reversed, at least temporarily. Between 2009 and 2014, 140,000 more Mexicans left the United States than they did, probably due to the effects of the financial crisis. One of the reasons NAFTA did not cause the expected reduction in immigration was the peso crisis from 1994 to 1995, which sent the Mexican economy into recession. Another thing is that the reduction of tariffs on Mexican maize has not prompted Mexican corn growers to plant other more lucrative crops.

This led them to abandon agriculture. A third point is that the Mexican government has not secured the promised infrastructure investments, which has largely limited the impact of the pact on production in the north of the country. Second, NAFTA eliminated many tariffs on imports and exports between the three countries. Tariffs are taxes that are used to increase the cost of foreign goods.

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