North American Free Trade Agreement

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North American Free Trade Agreement

Ratified in 1993, the Tratado de Libre Comercio, or Free Trade Agreement, bound Canada, Mexico, and the United States into a vast and unprecedented trade accord. When the treaty went into effect on 1 January 1994, it provided the framework to liberalize the flow of commerce and investment within the member nations. At that time it represented the largest free-trade zone on earth, with more than 360 million people and a Gross National Product in excess of 6.5 trillion dollars. The North American Free Trade Agreement (NAFTA) is an improved and expanded version of the Canada-U.S. Free Trade Agreement, signed in 1988, and incorporates the experience of that treaty by addressing its major problems.

NAFTA comprises a basic trade alliance signed in 1992 by the heads of government of the three countries and three side agreements approved in September 1993 that the Clinton administration thought were necessary to ensure the Free Trade Agreement's passage by Congress. The essence of NAFTA is the elimination of barriers to trade in goods and services, the promotion of fair competition, and the creation of increased investment opportunities—aspects that are monitored by a commission based in Mexico. The provisions on environmental issues address the prevention of pollution and the enforcement of environmental laws and is overseen by a review board established in Canada. A commission located in the United States has the responsibility for enforcing the laws and regulations dealing with labor conditions. The treaty includes a parallel agreement to assess import surges that could harm specific sectors of the three countries' economies and to take measures to ameliorate their negative impact.

The free trade process began when Mexican president Carlos Salinas De Gortari proposed the idea to U.S. president George Bush in March 1990. The Canadians later expressed their desire to participate in the negotiations in order to protect their interests and improve their own free trade agreement with the United States. Despite official support, the prospect of such an agreement elicited unexpected and strong opposition in the United States and Canada from an array of partisans on both the left and the right of the political spectrum. In the United States these groups consisted mainly of labor unions (with AFL-CIO president Lane Kirkland expressing strong opposition); protectionist special interest groups in industry and agriculture; environmental and nongovernmental organizations of a diverse nature, including the Sierra Club, consumer advocate Ralph Nader, African-American political leader Jesse Jackson, third-party presidential candidate Ross Perot, and such dissident Republicans as Pat Buchanan. Those who supported the agreement were the usual free-trade advocates in the business community, academia, and the government, who saw not only its economic implications but also its strategic and political ramifications, and the high end of the workforce, confident of widening the opportunities for jobs and improving intellectual property protection. In Mexico there was widespread support for the agreement except among the backers of Cuauhtémoc Cárdenas and other left-wing politicians who believed that nothing sponsored by a government led by the Institutional Revolutionary Party (PRI) could be beneficial for the country.

The economic consequences of the Free Trade Agreement have been mixed. For Mexico, foreign investment and its exports have increased dramatically. However, Mexico's overall economic growth has been lackluster. In 1993, Mexico devalued its peso causing a severe economic downturn. The economy recovered and has been stable but not robust. Due to the lack of job opportunities, Mexican immigration to the United States increased dramatically in the 1990s and early twenty-first century. Also, politicians in Mexico have complained that U.S. agricultural subsidies give U.S. farmers an unfair advantage over Mexico's rural sector. Finally, NAFTA primarily benefited Mexico's northern states, while Mexico's south has received little new investment.

Some analysts predicted that NAFTA would create hundreds of thousands of jobs in the U.S. and Canada, whereas detractors argued that employers in large numbers would leave the United States for Mexico. In reality, NAFTA, although slightly positive, has had a less dramatic impact on the economies of the United States and Canada because of their much larger sizes. Thus, NAFTA has generally been seen as a letdown. Part of the disappointment with NAFTA stems from the very optimistic predictions leaders in all three countries made before the agreement passed. Nevertheless, majorities in Canada, the United States, and Mexico still support the treaty. Also, these nations continue to pursue free trade agreements with other countries. The United States signed free trade pacts with Central America and Colombia. Mexico has likewise signed trade agreements with many Spanish American countries, Japan, and the South American trading block (Mercosur). All three countries are involved in a potential pact called the Free Trade Area of the Americas (FTAA). However, disagreements between Brazil and the United States means that the completion of FTAA will be several years away, if at all.

BIBLIOGRAPHY

Sydney Weintraub, A Marriage of Convenience: Relations Between Mexico and the United States (1990).

Luis Rubio, ¿Cómo va a afectar a México el Tratado de Libre Comercio? (1992).

Gary C. Hufbauer and Jeffery J. Schott, North American Free Trade: Issues and Recommendations (1992), and NAFTA: An Assessment, rev. ed. (1993).

Manuel Suárez-Mier, "The NAFTA and Its Impact on the U.S. and the Mexican Economies," in Global Competitor 1, no. 1 (1993): 33-38.

Additional Bibliography

Borja Tamayo, J. Arturo, Judith Mariscal, and Miguel Angel Valverde. Para evaluar al TLCAN. México: Tec de Monterrey, Campus Ciudad de México, 2001.

Hufbauer, Gary Clyde, and Jeffrey J. Schott. NAFTA Revisited: Achievements and Challenges. Washington, DC: Institute for International Economics, 2005.

Kirton, John J., and Virginia White Maclaren, eds. Linking Trade, Environment, and Social Cohesion: NAFTA Experiences, Global Challenges. Aldershot, Hampshire, England: Ashgate, 2002.

Manuel SuÁrez-Mier

Byron Crites

Encyclopedia of Latin American History and Culture