North American Free Trade Agreement

INTRODUCTION
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada,
the U.S. and Mexico making it the world’s largest free trade area in terms of GDP. As of
January 1, 2008, all tariffs between the three countries have have been eliminated.
Between 1993-2007, trade tripled from $297 billion to $930 billion.

The North American Free Trade Agreement or NAFTA , French is an agreement

signed by the governments of the United States, Canada, andMexico creating a
trilateral trade bloc in North America. The agreement came into force on January 1,
1994. It superseded the Canada-United States Free Trade Agreement between the U.S.
and Canada. In terms of combined purchasing power parity GDP of its members, as of
2007 the trade block is the largest in the world and second largest by nominal GDP
comparison.

The North American Free Trade Agreement (NAFTA) has two supplements, the North
American Agreement on Environmental Cooperation (NAAEC) and the North American
Agreement on Labor Cooperation (NAALC).

NAFTA's naming
American intellectual Noam Chomsky has argued that the only true words in the phrase
"North American Free Trade Agreement" seem to be "North America", as what is called
trade is in reality mostly restricted intra-corporate transfers of products and services.
Agreement is lacking as NAFTA was passed with a lack of democratic oversight
protocols and widespread public opposition.

Adam Smith, states in The Wealth of Nations that free trade includes the labor
component as a factor of production:

"By obstructing the free circulation of labour and stock both from employment to employment, and
from place to place, occasions in some cases a very inconvenient inequality in the whole of the
advantages and disadvantages of their different employments."

Within NAFTA official law and agreements the movement of labor is temporary and
very restrictive, especially for unskilled workers.Mexican (legal and illegal) migration to
the USA is surging, but not due to NAFTA provisions. NAFTA provisions for freedom of
movement of workers are very restrictive compared to one of the economic freedoms of
the European Union, the freedom of movement for workers.

When Was NAFTA Started?

1|Page
 North American Free Trade Agreement

NAFTA was signed by U.S. President George H.W. Bush, Mexican President Salinas,
and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the legislatures of
the three countries in 1993. The U.S. House approved it by 234 to 200 on November 17
and the Senate by 60 to 38 on November 20. It was signed into law by President Bill
Clinton on December 8, 1993 and entered force January 1,1994. Although it was started
by President Bush, it was a priority of President Clinton's, and its passage is considered
one of his first successes. (Source: History.com, NAFTA Signed into Law, December 8,
1993.

How Was NAFTA Started?

The impetus for NAFTA actually began with President Ronald Regan, who campaigned
on a North American common market. In 1984, Congress passed the Trade and Tariff
Act. This is important because it gave the President "fast-track" authority to negotiate
free trade agreements, while while only allowing Congress the ability to approve or
disapprove, not change negotiating points. Canadian Prime Minister Mulroney agrees
with Reagan to begin negotiations for the Canada-U.S. Free Trade Agreement, which
was signed in 1988, went into effect in 1989 and is now suspended due to NAFTA.
(Source: NaFina, NAFTA Timeline)

Meanwhile, Mexican President Salinas and President Bush began negotiations for a
liberalized trade between the two countries. Prior to NAFTA, Mexican tariffs on U.S.
imports were 250% higher than U.S. tariffs on Mexican imports. In 1991, Canada
requests a trilateral agreement, which then led to NAFTA. In 1993, concerns about
liberalization of labor and environmental regulations led to the adoption of two
addendums to NAFTA.

2|Page
 North American Free Trade Agreement

Why Was NAFTA Formed?

Article 102 of the NAFTA agreement outlines its purpose:

Grant the signatories Most Favored Nation status.

Eliminate barriers to trade and facilitate the cross-border movement of goods and
services.
Promote conditions of fair competition.
Increase investment opportunities.
Provide protection and enforcement of intellectual property rights.
Create procedures for the resolution of trade disputes.
Establish a framework for further trilateral, regional and multilateral cooperation to
expand NAFTA's benefits.

3|Page
 North American Free Trade Agreement

Background

In 1988 Canada and the United States signed the Canada-United States Free Trade
Agreement. The American government then entered into negotiations with the Mexican
government for a similar treaty, and Canada asked to join the negotiations in order to
preserve its perceived gains under the 1988 deal. The international climate at the time
favoured expanding trade blocs, and the Maastricht Treaty which created theEuropean
Union was signed in 1992.

Following diplomatic negotiations dating back to 1991 between the three nations, the
leaders met in San Antonio, Texas, on December 17, 1992, to sign NAFTA. U.S.
President George H.W. Bush, Canadian Prime Minister Brian Mulroney and Mexican
President Carlos Salinas, each responsible for spearheading and promoting the
agreement, ceremonially signed it. The agreement then needed to be ratified by each
nation's legislative or parliamentary branch.

Before the negotiations were finalized, Bill Clinton came into office in the U.S. and Kim
Campbell in Canada, and before the agreement became law, Jean Chrétien had taken
office in Canada.

The proposed Canada-U.S.trade agreement had been extremely controversial and

divisive in Canada, and the 1988 Canadian election was fought almost exclusively on
that issue. In that election more Canadians voted for anti-free trade parties
(the Liberals and the New Democrats) but more seats in parliament were won by the pro-
free trade Progressive Conservatives (PCs). Mulroney and the PCs had a parliamentary
majority and were able to easily pass the Canada-U.S. FTA and NAFTA bills. However
Mulroney himself had become deeply unpopular and resigned on June 25, 1993. He was
replaced as Conservative leader and prime minister by Kim Campbell, who then led the
PC party into the 1993 election where they were decimated by the Liberals under Jean
Chrétien. Chrétien had campaigned on a promise to renegotiate or abrogate NAFTA, but
instead negotiated the two supplemental agreements with the new U.S. Democratic
president, and ideological ally, Bill Clinton.

4|Page
 North American Free Trade Agreement

Facts About NAFTA

1. History of NAFTA

NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada,
the U.S. and Mexico making it the world’s largest free trade area in terms of GDP. Three
U.S. Presidents were involved in creating it over a decade. Find out how it was created,
what its purpose was and how large it is today.

2. Advantages of NAFTA

NAFTA created the world’s largest free trade area, linking 439 million people and
producing $15.3 trillion in goods and services annually. Estimates are that NAFTA will
increase U.S. GDP by between .1% - .5%. Trade between the NAFTA signatories tripled,
from $297 billion in 1993 to $903 billion in 2007. Find out what industries benefited, and
how NAFTA specifically supported this increase in trade.

NAFTA created the world’s largest free trade area, linking 439 million people and
producing $15.3 trillion in goods and services annually. Estimates are that NAFTA
increases U.S. GDP by as much as .5% a year.

That's because its elimination of tariffs and agreements on international rights for
business investors increases trade and capital, spurring business growth. Elimination of
tariffs also reduces inflation, by decreasing costs of imports.

Increase in Trade:

Trade between the NAFTA signatories tripled, from $297 billion in 1993 to $903 billion in
2007. Specifically,U.S. goods exports to Canada and Mexico grew 157%, from $142
billion to $364.6 billion.Exports from Canada and Mexico to the U.S. grew 231%, from
$151 billion in to $501 billion.NAFTA provides the ability for firms in member countries to
bid on government contracts. It also protect intellectual properties.

5|Page
 North American Free Trade Agreement

Increase in U.S. Agricultural Exports:

NAFTA is especially helpful for agricultural exports because it reduces high Mexican
tariffs. Mexico is the top export destination for beef, rice, soybean meal, corn
sweeteners, apples and beans. It is the second largest for corn, soybeans and oils. As a
result of NAFTA, the percent of U.S. agricultural exports to Canada and Mexico has
grown from 22% in 1993 to 30% in 2007. (Source: USTR, NAFTA Facts, March 2008)

Increase in Trade of Services:

More than 40% of U.S. GDP is services, including financial services and health care.
These aren't as easily transported as are goods, so being able to expand services to
nearby countries is important. Thanks to NAFTA, U.S. services exports to Canada and
Mexico grew 125%, from $25 billion to $62 billion in 2006. Services exports from Canada
and Mexico grew to $37 billion.NAFTA eliminates trade barriers in nearly all service
sectors. Service industries are often highly regulated, and the regulations aren't always
apparent. NAFTA requires authorities to use open administrative procedures and publish
all regulations.

Increase in Foreign Direct Investment:

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico
tripled to $331 billion (as of 2006, latest data available). Canadian and Mexican FDI in
the U.S. was $165 billion.NAFTA reduces risk for investors by guaranteeing they will
have the same legal rights as local investors. It also guarantees they will receive fair
market value for their investments in case the government decides to nationalize the
industry or take the property by eminent domain. NAFTA provides a legal mechanism for
investors to make claims against a government, if needed.

6|Page
 North American Free Trade Agreement

3. Disadvantages of NAFTA

NAFTA has been criticized for both displacing American workers and decreasing wage
levels for those that remain. Mexican workers have also suffered, as have Mexican
farmers and its environment. Find out the facts behind these accusations, and how
NAFTA contributed to these problems.

NAFTA has many disadvantages. NAFTA allowed U.S. manufacturers to move jobs to
lower-cost Mexico. Those manufacturers that remained had to decrease wages to
compete.

Many of Mexico's farmers were put out of business by U.S.-subsidized farm products.
NAFTA provisions for Mexican labor and environmental protection were not strong
enough, allowing for exploitation.

Loss of U.S. Jobs:

Since the cost of labor is cheaper in Mexico, many manufacturing industries moved part
of their production from high-cost U.S. states. Between 1994 and 2002, the U.S. lost 1.7
million jobs, gaining only 794,00, for a net loss of 879,000 jobs. Most of these jobs(78%)
were in manufacturing. States hit hard included California, New York, Michigan and
Texas. These states had high concentrations of the industries that moved plants to
Mexico. These industries included motor vehicles, textiles, computers, and electrical
appliances. (Source: Economic Policy Institute, The High Cost of Free Trade, November
17, 2003)

Lower U.S. Wages:

Employers in industries that could move to Mexico used that as a threat during union
organizing drives, thus suppressing wage growth. Between 1993 and 1995, 50% of all
companies used the threat; by 1999, that rate had grown to 65%.

Mexico's Farmers Are Being Put Out of Business:

Thanks to the 2002 Farm Bill, U.S. agribusiness is heavily subsidized - as much as 40%
of net farm income. As tariffs are removed, corn and other food is exported to Mexico
below cost. This benefits consumers, who pay less for food, but makes it impossible for
rural Mexican farmers to compete. In contrast, between 1990-2001, Mexico decreased
its subsidies to farmers from 33.2% to 13.2% of total farm income. Most of those
subsidies go to Mexico's large farms. (Source: International Forum on Globalization,

7|Page
 North American Free Trade Agreement

Exposing the Myth of Free Trade, February 25, 2003; The Economist, Tariffs and
Tortillas, January 24, 2008)

Maquiladora Workers Are Exploited:

NAFTA caused an increase of the maquiladora program, in which U.S. owned

companies employ Mexican workers near the border to cheaply assemble products for
"export" to the U.S. This now comprises 30% of Mexico's labor force. These workers
have "no labor rights or health protections, workdays stretch out 12 hours or more, and if
you are a woman, you could be forced to take a pregnancy test when applying for a job,"
according to Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA,
April 20, 2001)

Degradation of Mexico's Environment Has Increased:

In response to NAFTA competitive pressure, Mexico agribusiness has increased its use
of fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers
have expanded into more marginal land, resulting in deforestation at a rate of 630,000
hectares per year.

4. U.S. Regional Trade Agreements

How does NAFTA fit within the context of other U.S. regional trade agreements, such as
CAFTA, FTAA, and MEFTI?

8|Page
 North American Free Trade Agreement

What Are Exchange Rates?

The dollar's exchange rate tells you how much a dollar is worth in a foreign currency, and
vice versa. For example, on March 3, 2008, a dollar was worth $.98 Canadian dollars,
7.01 Chinese yuan, and 103.57 Japanese yen. The Euro is normally quoted in terms of
its dollar value, for some reason, so one Euro was worth $1.52.

Provisions
The goal of NAFTA was to eliminate monkeys of trade and investment between the USA,
Canada and Mexico. The implementation of NAFTA on January 1, 1994, brought the
immediate elimination of tariffs on more than one half of US imports from Mexico and
more than one third of US exports to Mexico. Within 10 years of the implementation of
the agreement all US-Mexico tariffs would be eliminated except for some US agricultural
exports to Mexico that were to be phased out in 15 years. Most US-Canada trade was
already duty free. NAFTA also seeks to eliminate non-tariff trade barriers.

9|Page
 North American Free Trade Agreement

NAFTA or North American Free Trade Agreement

NAFTA covers Canada, the U.S. and Mexico making it the world's largest free trade
area. By 2008 almost all tariffs will have been eliminated. From 1993 (the initiation of
NAFTA) to 2005, trade increased from $297 billion to $810 billion.

The North America Free Trade Agreement, also known as NAFTA, is a trade agreement
between the United States, Canada, and Mexico. NAFTA eliminated the majority of tariffs
on products traded among the United States, Canada, and Mexico, and gradually
phased out other tariffs over a 15-year period. The treaty also protects intellectual
property rights (patents, copyrights, and trademarks), and outlines the removal of
investment restrictions among the three countries. There have been positive and
negative outcomes from the NAFTA agreement. Some argue that NAFTA has been
positive for Mexico, which has seen its poverty rates fall and real income rise, even after
accounting for the 1994–1995 economic crisis. Others 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 US workers in manufacturing and assembly
industries who lost jobs. Critics also argue that NAFTA has contributed to the rising
levels of inequality in both the U.S. and Mexico. Some economists believe that NAFTA
has not been enough to produce an economic convergence, nor to substantially reduce
poverty rates. Some have suggested that in order to fully benefit from the agreement,
Mexico must invest more in education and promote innovation in infrastructure and

10 | P a g e
 North American Free Trade Agreement

agriculture. Overall, NAFTA has not caused any trade diversion aside from the textiles
and apparel industry.

TIMELINE:
1988: Canada and the US signed the Canada-U.S. Free Trade Agreement.
January 1, 1994: NAFTA was made as an expansion on the earlier US-
Canada trade agreement.

2001: After the attacks on September 11, the United States signed the
Security and Prosperity Partnership of North America.
2001: Mexico’s percentage of exports ousted its percentage of imports.

2006: Foreign officials were admitted into the US because of the NAFTA
agreement.
2006: Canadian Government estimates that 24,830 US citizens and 15,219
Mexican citizens were present in Canada as "foreign workers".

11 | P a g e
 North American Free Trade Agreement

Effects

NAFTA's effects, both positive and negative, have been quantified by several
economists, whose findings have been reported in publications such as the World
Bank's Lessons from NAFTA for Latin America and the Caribbean NAFTA's Impact on
North America, and NAFTA Revisited by the Institute for International Economics. Some
argue that NAFTA has been positive for Mexico, which has seen itspoverty rates fall and
real income rise (in the form of lower prices, especially food), even after accounting for
the 1994–1995 economic crisis. Others 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. Critics also argue that NAFTA has contributed to the rising
levels of inequality in both the U.S. and Mexico. Some economists believe that NAFTA
has not been enough (or worked fast enough) to produce an economic convergence, nor
to substantially reduce poverty rates. 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.

12 | P a g e
 North American Free Trade Agreement

Trade
According to Issac (2005), overall, NAFTA has not caused trade diversion, aside from a
few industries such as textiles and apparel, in whichrules of origin negotiated in the
agreement were specifically designed to make U.S. firms prefer Mexican manufacturers.
The World Bank also showed that the combined percentage growth of NAFTA imports
was accompanied by an almost similar increase of non-NAFTA exports.

Industry
Maquiladoras (Mexican factories which take in imported raw materials and produce
goods for export) have become the landmark of trade in Mexico. These are plants that
moved to this region from the United States, hence the debate over the loss of American
jobs. Hufbauer's (2005) book shows that income in the maquiladora sector has increased
15.5% since the implementation of NAFTA in 1994. Other sectors now benefit from the
free trade agreement, and the share of exports from non-border states has increased in
the last five years while the share of exports from maquiladora-border states has
decreased. This has allowed for the rapid growth of non-border metropolitan areas, such
as Toluca, Leónand Puebla; all three larger in population than Tijuana, Ciudad Juárez,
and Reynosa. The main non-maquiladora industry that has suffered from NAFTA is the
automobile industry.

13 | P a g e
 North American Free Trade Agreement

Environment
Securing U.S. congressional approval for NAFTA would have been impossible without
addressing public concerns about NAFTA’s environmental impact. The Clinton
administration negotiated a side agreement on the environment with Canada and
Mexico, the North American Agreement on Environmental Cooperation (NAAEC), which
led to the creation of the Commission for Environmental Cooperation (CEC) in 1994. To
alleviate concerns that NAFTA, the first regional trade agreement between a developing
country and two developed countries, would have negative environmental impacts, the
CEC was given a mandate to conduct ongoing ex post environmental assessment of
NAFTA.

In response to this mandate, the CEC created a framework for conducting environmental
analysis of NAFTA, one of the first ex post frameworks for the environmental assessment
of trade liberalization. The framework was designed to produce a focused and systematic
body of evidence with respect to the initial hypotheses about NAFTA and the
environment, such as the concern that NAFTA would create a “race to the bottom” in
environmental regulation among the three countries, or the hope that NAFTA would
pressure governments to increase their environmental protection mechanisms. The CEC
has held four symposia using this framework to evaluate the environmental impacts of
NAFTA and has commissioned 47 papers on this subject. In keeping with the CEC’s
overall strategy of transparency and public involvement, the CEC commissioned these
papers from leading independent experts.

Overall, none of the initial hypotheses was confirmed. NAFTA did not inherently present
a systemic threat to the North American environment, as was originally feared, but
NAFTA-related environmental threats instead occurred in specific areas where
government environmental policy, infrastructure, or mechanisms, were unprepared for
the increasing scale of production under trade liberalization. In some cases,
environmental policy was neglected in the wake of trade liberalization; in other cases,
NAFTA's measures for investment protection, such as Chapter 11, and measures
against non-tariff trade barriers, threatened to discourage more vigorous environmental
policy.[16] The most serious overall increases in pollution due to NAFTA were found in the
base metals sector, the Mexican petroleum sector, and the transportation equipment
sector in the United States and Mexico, but not in Canada.

14 | P a g e
 North American Free Trade Agreement

Agriculture
From the earliest negotiation, agriculture was (and still remains) a controversial topic
within NAFTA, as it has been with almost all free trade agreements that have been
signed within the WTO framework. Agriculture is the only section that was not negotiated
trilaterally; instead, three separate agreements were signed between each pair of parties.
The Canada–U.S. agreement contains significant restrictions and tariff quotas on
agricultural products (mainly sugar, dairy, and poultry products), whereas the Mexico–
U.S. pact allows for a wider liberalization within a framework of phase-out periods (it was
the first North–South FTA on agriculture to be signed).

The overall effect of the Mexico–U.S. agricultural agreement is a matter of dispute.

Mexico did not invest in the infrastructure necessary for competition, such as efficient
railroads and highways, creating more difficult living conditions for the country's poor.
Still, the causes of rural poverty cannot be directly attributed to NAFTA; in fact, Mexico's
agricultural exports increased 9.4 percent annually between 1994 and 2001, while
imports increased by only 6.9 percent a year during the same period.

Production of corn in Mexico has increased since NAFTA's implementation. However,

internal corn demand has increased beyond Mexico's sufficiency, and imports have
become necessary, far beyond the quotas Mexico had originally negotiated. Zahniser &
Coyle have also pointed out that corn prices in Mexico, adjusted for international prices,
have drastically decreased, yet through a program of subsidies expanded by former
president Vicente Fox, production has remained stable since 2000.

The logical result of a lower commodity price is that more use of it is made downstream.
Unfortunately, many of the same rural people who would have been likely to produce
higher-margin value-added products in Mexico have instead emigrated. The rise in corn
prices due to increased ethanol demand may improve the situation of corn farmers in
Mexico.

In a study published in the August 2008 issue of the American Journal of Agricultural
Economics, NAFTA has increased U.S. agricultural exports to Mexico and Canada even
though most of this increase occurred a decade after its ratification. The study focused
on the effects that gradual "phase-in" periods in regional trade agreements, including
NAFTA, have on trade flows. Most of the increase in members’ agricultural trade, which
was only recently brought under the purview of the World Trade Organization, was due
to very high trade barriers before NAFTA or other regional trade agreements.

15 | P a g e
 North American Free Trade Agreement

Mobility of persons
According to the Department of Homeland Security Yearbook of Immigration Statistics,
during fiscal year 2006 (i.e., October 2005 through September 2006), 74,098 foreign
professionals (64,633 Canadians and 9,247 Mexicans) were admitted into the United
States for temporary employment under NAFTA (i.e., in the TN status). Additionally,
17,321 of their family members (13,136 Canadians, 2,904 Mexicans, as well as a
number of third-country nationals married to Canadians and Mexicans) entered the U.S.
in the treaty national's dependent (TD) status.[22]Because DHS counts the number of the
new I-94 arrival records filled at the border, and the TN-1 admission is valid for one year,
the number of non-immigrants in TN status present in the U.S. at the end of the fiscal
year is approximately equal to the number of admissions during the year. (A discrepancy
may be caused by some TN entrants leaving the country or changing status before their
one-year admission period expired, while other immigrants admitted earlier may change
their status to TN or TD, or extend earlier granted TN status).

Canadian authorities estimated that, as of December 1, 2006, the total of 24,830 U.S.
citizens and 15,219 Mexican citizens were present in Canada as "foreign workers".
These numbers include both entrants under the NAFTA agreement and those who have
entered under other provisions of the Canadian immigration law. New entries of foreign
workers in 2006 were 16,841 (U.S. citizens) and 13,933 (Mexicans).

16 | P a g e
 North American Free Trade Agreement

Criticism and controversies

Canadian disputes
There is much concern in Canada over the provision that if something is sold even once
as a commodity, the government cannot stop its sale in the future.[25] This applies to the
water from Canada's lakes and rivers, fueling fears over the possible destruction of
Canadian ecosystems and water supply.

In 1999, Sun Belt Water Inc., a company out of Santa Barbara, California, filed an
Arbitration Claim under Chapter 11 of the NAFTA claiming $105 million as a result of
Canada's prohibition on the export of bulk water by marine tanker, a move that destroyed
the Sun Belt business venture. Sun Belt maintains a website where many documents
concerning the Arbitration are posted www.sunbeltwater.com. The claim sent shock
waves through Canadian governments that scrambled to update water legislation and
remains unresolved.

Other fears come from the effects NAFTA has had on Canadian lawmaking. In 1996, the
gasoline additiveMMT was brought into Canada by an American company. At the time,
the Canadian federal government banned the importation of the additive. The American
company brought a claim under NAFTA Chapter 11 seeking US$201 million, and by
Canadian provinces under the Agreement on Internal Trade ("AIT"). The American
company argued that their additive had not been conclusively linked to any health
dangers, and that the prohibition was damaging to their company. Following a finding
that the ban was a violation of the AIT, the Canadian federal government repealed the
ban and settled with the American company for US$13 million. Studies by Health and
Welfare Canada (now Health Canada) on the health effects of MMT in fuel found no
significant health effects associated with exposure to these exhaust emissions. Other
Canadian researchers and the U.S. Environmental Protection Agency disagree with
Health Canada, and cite studies that include possible nerve damage.

The United States and Canada had been arguing for years over the United States'
decision to impose a 27 percent duty on Canadian softwood lumber imports, until new
Canadian Prime Minister Stephen Harpercompromised with the United States and
reached a settlement on July 1, 2006. The settlement has not yet been ratified by either
country, in part due to domestic opposition in Canada.

17 | P a g e
 North American Free Trade Agreement

Canada had filed numerous motions to have the duty eliminated and the collected duties
returned to Canada. After the United States lost an appeal from a NAFTA panel, it
responded by saying "We are, of course, disappointed with the [NAFTA panel's]
decision, but it will have no impact on the anti-dumping andcountervailing duty orders."
(Nick Lifton, spokesman for U.S. Trade Representative Rob Portman) On July 21, 2006,
the U.S. Court of International Trade found that imposition of the duties was contrary to
U.S. law.
Canadian government challenged on change in Income trust taxation
On October 30, 2007, American citizens Marvin and Elaine Gottlieb filed a Notice of
Intent to Submit a Claim to Arbitration under NAFTA. The couple claims thousands of
U.S. investors lost a total of $5 billion dollars in the fall-out from the Conservative
Government's decision the previous year to change the tax rate on income trusts in the
energy sector. On 29 April 2009, a determination was made that this change in tax law
was not expropriation.

U.S. deindustrialization
An increase in domestic manufacturing output and a proportionally greater domestic
investment in manufacturing does not necessarily mean an increase in domestic
manufacturing jobs; this increase may simply reflect greater automation and higher
productivity. Although the U.S. total civilian employment may have grown by almost 15
million in between 1993 and 2001, manufacturing jobs only increased by 476,000 in the
same time period. Furthermore from 1994 to 2007, net manufacturing employment has
declined by 3,654,000, and during this period several other free trade agreements have
been concluded or expanded.

18 | P a g e
 North American Free Trade Agreement

Impact on Mexican farmers

Critics of NAFTA cite negative affects on Mexico's corn farmers

In 2000, U.S. government subsidies to the corn sector totaled $10.1 billion, a figure ten
times greater than the total Mexican agricultural budget that year.These subsidies have
lead to charges of de factodumping which jeopardizes Mexican farms and the country's
food self-sufficiency.

Other studies reject NAFTA as the force responsible for depressing the incomes of poor
corn farmers, citing the trend's existence more than a decade before NAFTA's existence,
an increase in maize production after NAFTA went into effect in 1994, and the lack of a
measurable impact on the price of Mexican corn due to subsidized corn coming into
Mexico from the United States, though they agree that the abolition of U.S. agricultural
subsidies would benefit Mexican farmers.According to Graham Purchase in Anarchism
and Environmental Survival, NAFTA could cause "the destruction of the ejidos (peasant
cooperative village holdings) by corporate interests, and threatens to completely reverse
the gains made by rural peoples in the Mexican Revolution."

19 | P a g e
 North American Free Trade Agreement

Certificate of Origin of NAFTA

Canada, Mexico and the United States established a uniform Certificate of Origin to
certify that goods imported into their territories qualify for the preferential tariff treatment
accorded by the NAFTA. Only importers who possess a valid Certificate of Origin may
claim preferential tariff treatment for originating goods.

Language

A uniform Certificate of Origin is used in all three countries and is printed in English,
French or Spanish. The Certificate shall be completed in the language of the country of
export or the language of the importing country, at the exporter's discretion. Importers
shall submit a translation of the Certificate to their own customs administration when
requested.

Scope

A Certificate of Origin may cover a single importation of goods or multiple importations

of identical goods. Certificates that cover multiple shipments are called blanket
certificates and may apply to goods imported within any twelve-month period specified
on the Certificate. Although a Certificate of Origin may cover goods imported over not
more than a twelve-month period, it remains valid for NAFTA preference claims made up
to four years from the date upon which it was signed.

A machine made in Canada qualifies for NAFTA tariff treatment and is exported with a
Certificate of Origin signed on January 1, 1995. The U.S. importer does not enter the
machine for consumption but instead places it in a customs bonded warehouse. He
overlooks the Certificate of Origin and fails to claim NAFTA treatment for the machine
upon entry into the warehouse. If the U.S. importer withdraws the machine from the
warehouse for consumption on January 17, 1999, he will be barred from claiming NAFTA
treatment upon withdrawal because the Certificate is over four years old and is no longer
valid.

20 | P a g e
 North American Free Trade Agreement

Completion of Certificate

The Certificate of Origin must be completed and signed by the exporter of the goods.
Where the exporter is not the producer, the exporter may complete the Certificate on the
basis of:

• knowledge that the good originates;

• reasonable reliance on the producer's written representation that the good
originates; or
• a completed and signed Certificate of Origin for the good voluntarily provided to
the exporter by the producer.

Importers' Obligations

Importers claiming NAFTA preferential tariff treatment shall make a declaration, based
on a valid Certificate of Origin in their possession, on the import documentation. Where
no claim for preferential tariff treatment is made at the time of importation, importers may
request preferential tariff treatment no later than one year after the date on which the good
was imported, provided a Certificate of Origin for the goods is obtained.

Importers must provide the Certificate to the importing country's customs administration
upon request, and must submit a corrected declaration and pay the corresponding duties
whenever there is reason to believe that the Certificate contained inaccurate information.

The customs administration of the importing country may deny preferential tariff
treatment to the goods if the importer fails to comply with any of the customs procedures
set out in Chapter Five of the NAFTA.

Importers must maintain records pertaining to the importation for five years or such
longer period as may be specified by their country.

Exporters' and Producers' Obligations

Exporters or producers that prepare Certificates of Origin shall provide copies to their
own customs administration upon request.

Exporters or producers that provide a Certificate of Origin must maintain records

pertaining to the exportation for five years or such longer period as may be specified by
their countries.

Exporters or producers that complete a Certificate of Origin shall notify all parties to
whom the Certificate was given of any change that could affect its accuracy or validity.

21 | P a g e
 North American Free Trade Agreement

Diagramatic Records

NAFTA 2001
The most significant thing about
this 2000 chart is that fact that
despite lots of encouragement from
federal and provincial governments
for Canadian exporters to seek out
markets in Asia, Europe and Latin
America - we still do more than
87% of our business with the U.S.

Mexico - highly touted as an

opportunity for us in 2001 and
beyond, is the tiny slice of green in
the chart to the left.

xx

NAFTA 2006
In the later years of the 1990's it
appeared that NAFTA was
responsible for Canada doing more
and more trade with the U.S. - and
therefore increasing our
vulnerability to swings in the U.S.
economy and reducing our
business with the ROW (rest of the
world).

However, as the U.S. economy

began to slow in the "Bush"
administration, Canadian
companies have sought more
business with the rest of the world,
which is reflected in an updated
chart showing Canadian exports to
the U.S.

22 | P a g e
 North American Free Trade Agreement

How
NAFTA
was in
1996?

How
NAFTA
was in
2006?

since 2001, we have done much better diversifying away from exporting mostly to the
U.S. and are improving our exports to Asia-Pacific and Europe

23 | P a g e
North American Free Trade Agreement

24 | P a g e
 North American Free Trade Agreement

U.S. NAFTA trade deficit surging in 2003

U.S. NAFTA trade deficit surging in 2003

Since the U.S. entered into the North American Free Trade Agreement (NAFTA) with
Mexico and Canada, the trade deficit with these countries has grown rapidly (see chart
below). U.S. firms moved plants to Mexico and Canada to take advantage of lower wages
and new rules providing unheard of levels of protection for foreign investors. The
combined U.S. trade balance with the other two NAFTA countries (the difference
between U.S. exports and imports) was a small, stable deficit prior to NAFTA. Since
NAFTA that combined deficit has grown rapidly. U.S. imports have been growing more
rapidly than exports, so the trade deficit has expanded. When the growth of this deficit
eased in 2002, some claimed that U.S. trade with China and other lower-wage countries
was displacing NAFTA trade. Contrary to this view, the U.S. NAFTA deficit has
increased 12.2% so far this year, evidence that deficits with Mexico and Canada are a
continuing drag on U.S. growth and job creation.

Exports, which expand domestic production, increase the number of U.S. industrial
jobs, while imports, which replace goods that could have been produced in the United
States, eliminate jobs. The rise in the U.S. deficit with Canada and Mexico from 1993
25 | P a g e
 North American Free Trade Agreement

to 2000 displaced production supported by 766,000 U.S. jobs. Most of those jobs
would have been high-wage positions in manufacturing industries. The sustained
growth of this deficit suggests that NAFTA continues to eliminate more jobs in the
United States, which worsens the current economic downturn.

Further study of NAFTA by researchers in Canada and Mexico has shown that
workers in all three countries have been hurt, but for different reasons. In Mexico, real
wages have fallen sharply and there has been a sharp drop in the number of people
holding regular jobs in paid positions. Many workers have been shifted into
subsistence-level work in the "informal sector," frequently unpaid work in family retail
trade or restaurant businesses. In Canada, a decade of heightened competition with the
U.S. is eroding social investment in public spending on education, health care,
unemployment compensation, and a wide range of other public services. This
experience suggests that workers have good reasons to be concerned as we enter
NAFTA's second decade.

26 | P a g e
 North American Free Trade Agreement

What Is Barack Obama's Position on Free Trade?

Overall, Obama opposes many current trade agreements, which he says are bad for the
economy because they provide perks for businesses but don't protect workers.

Obama Has Three Main Proposals:

1. Amend NAFTA - He would re-open NAFTA to beef up protection for labor and the
environment.

2. Fight for Fair Trade - He opposes pending Free Trade Agreements (FTA's) with
Colombia because it allows violence against labor leaders and South Korea
because it restricts U.S. auto imports. He also wants to pressure the World Trade
Organization to enforce current agreements and stop unfair subsidies.

3. Improve Transition Assistance - He supports Federal funding for retraining

displace U.S. workers.

How Would Obama's Free Trade Position Impact the Economy?

Putting more job protection for U.S. workers in NAFTA and other FTA's may not help
American workers because it doesn't get at the source. Job outsourcing is a result of
declining U.S. competitiveness, which is itself a result of decades of the U.S. not
investing in education. This is particularly true for high tech, engineering, and science.

Opposing FTA's for two of America's closest allies, Colombia and South Korea, may
damage our relationship with them while hurting the U.S. economy. In fact, Colombia's
homicide rate against union members, and the public as a whole, has dropped 40%
since 2002 thanks to a government protection program.

27 | P a g e
 North American Free Trade Agreement

Rejection of the South Korean FTA could cause newly-elected South Korean President
Lee Myung-bak to further lose support among a population who are already upset that he
agreed to allow U.S. beef to be imported as part of the agreement. South Koreans
remember the cases of mad cow disease found in U.S. beef four years ago.

The agreement actually levels the playing field for the auto industry. Current South
Korean tariffs of 8% would be removed, as would current U.S. tariffs, which are lower at
3.5%.

NAFTA's open new markets for businesses by removing trade barriers. For example,
NAFTA increased trade from $297 billion to $810 billion. The Peterson Institute for
International Economics estimates that ending all trade barriers would increase U.S.
income by $500 billion.

Opening NAFTA to renegotiation would allow Mexico to address it complaints, including

immigration reform, U.S. farm subsidies and an unfulfilled NAFTA promise to allow
Mexican commercial trucks further into the U.S.

Free trade creates more jobs than it outsources. For example, the formation of the
European Union free trade area created 300,000–900,000 net new jobs. In the U.S, 1.3
million export-related jobs were created between 1994 and 1998.

Increasing U.S. protectionism will further slow economic growth and cause more layoffs,
not less. If the U.S. regresses and closes its borders, other countries will do the same.
This could cause layoffs among the 12 million U.S. workers who owe their jobs to
exports.

28 | P a g e
 North American Free Trade Agreement

What Free Trade Issues Is Obama Missing?

One of the key obstacles to the Doha round of the World Trade Organization agreement
was U.S. agricultural subsidies. Developing countries are afraid of low-cost, subsidized
U.S. farm products flooding their markets, essentially putting family farmers out of
business. Until the U.S. significantly reduces these subsidies, further progress on this
multi-lateral trade agreement is effectively dead in its tracks.

Contrary to popular opinion, agricultural subsidies no longer go to U.S. family farms.

Instead, tax programs that were designed to help Depression-era families keep their
farms are now effectively subsidizing huge corporations who have, in turn, put these
family farms out of business.

In fact, Obama's renewed pressure on the WTO to enforce other countries' subsidies
could then bring into question the subject of U.S. agricultural subsidies - still a sore point
in the international trade community. The failure of the Doha round has led to a fresh
wave of bilateral trade agreements between China, the Middle East, Latin America and
Africa. Further U.S. protectionism at this time will only increase this activity, thus pushing
the U.S. economy further out of the trade loop, and further into economic decline.

29 | P a g e
 North American Free Trade Agreement

Bibliography

- www.google.com

-www.wikipedia.org

-www.yahoo.com

• NAFTA’s OFFICIAL SITE

• NAFTA’S HITORY

30 | P a g e