NAFTA

North American Free Trade Agreement



North American Free Trade Agreement

Introduction

The Free Trade Agreement (NAFTA) signed between Canada, the United States and Mexico entered into force on January 1st, 1994. This agreement is intended to promote trade and investment. It includes a comprehensive program to eliminate tariffs and reduce non-tariff barriers. The NAFTA is accompanied by provisions on investment, services, intellectual property, competition and dispute settlement. NAFTA is now the largest free trade area of the world. The Paper will highlight the NAFTA agreement that whether it should be repealed or not, and will discuss the consequences and advantages that changed the trade of the world. First the paper will discuss the provisions of NAFTA and afterwards will discuss the critical points and changes made through this agreement.

Main provisions of NAFTA

Elimination of customs duties

Customs duties on exports to member states will be phased over a period of 10 years. Mexico granted direct access to many free Canadian exports, while 60% of Mexican products are already fully exempt from duty.

National Treatment

Canada, U.S. and Mexico treat products, services and investors of the other two parts of the same as theirs. Moreover, foreign investors are covered with NAFTA if they use the Member States as "home" to make investments in the United States, Canada or Mexico.

Guaranteed access to the market

Through NAFTA, Canadian products, U.S. and Mexican markets secure access to their partners in the area (Edward and Peter, 2002).

Dispute Resolution

These are binational panels. National courts will not resolve disputes or determine legal remedies against the dumping or countervailing measures. The disagreement between investors and States NAFTA can be settled by international arbitration.

Procurement

Each of the three countries agreed to increase opportunities for access to public markets, not only in the case of products but also services, including services in the construction field.

Business Travel

Through simplified procedures, business trips are faster. Business people eligible may enter temporarily in another country without prior approval procedure.

Intellectual Property

NAFTA also addresses intellectual property rights and provides for the standardization of rules and rights protection (Edward and Peter, 2002).

Critical Observation

An Asymmetric Agreement

The economic and trade relations between the three partners were already close before the signing of NAFTA. The United States was already the largest exporter to Mexico and Canada. They were a priori not much to gain from an economic point of view of the conclusion of the agreement of free trade. Not much to win especially with Mexico, which had already largely opened its market to U.S. products. Indeed, it joined the GATT in 1986, and admission to the closed circle of the OECD, marked the beginning of the march of Mexico on the path of economic liberalism. The NAFTA agreement is highly skewed, the GNP of the United States is 30 times that of Mexico and its accumulated wealth is 250 to 300 times that of Mexico. So what are the motivations of different partners?

Despite the temporary breakdown in its trade balance against the United States, Mexico has on its comparative advantages in several industrial sectors to penetrate the North ...