North American Free Trade Area

North American Free Trade Area:

In Sept 1993, the USA, Canada and Mexico signed the North America sources among Free Trade Agreement, which created the trading bloc NAFTA. It came into force on 1-1-1994. NAFTA was expected to remove all goods, services trade barriers among the members by 2009.

The main objectives of NAFTA are:

•        To eliminate trade barriers on trade and facilitate movement of goods and  services.

•        To develop cultural and social relations.

•        To remove restrictions on transfer of technology to member in terms of  nations.

•        To negotiate collectively with non-members on certain foreign -members in trade matters.

•        To promote fair competition in FTA.

•        To provide protection and enforcement of intellectual property rights.

•        To develop industries in Mexico in order to create employment and to reduce migration from Mexico to USA.

•        To assist Mexico in earning additional foreign exchange to meet it foreign debt burden.

Measures Undertaken by NAFTA:

•        Residents of NAFTA nations can invest freely in other NAFTA countries.

•        Protection of Intellectual Property Rights of the member countries.

•        Free movement of labour from one country to another.

•        Pollution control along the USA – Mexico border.

•        Standardization of product standards in member countries.

Achievements/Benefits:

1.      The main impact of NAFTA was on trade between the USA and Mexico. Canada only joined in the negotiations to ensure that its interests are protected. Between 1994 and 1999, two way trade between the USA and Mexico increased by 130%.

2.      The NAFTA also benefited the USA by increased competition in product and resource markets. Also by reduction in prices of many commodities to US consumers.

3.      US agricultural exporters to Canada and Mexico doubled by 2004. Canada is number one importer of US agriculture items followed by Mexico.

4.      US employment has increased due to NAFTA.

5.      The employment in Mexico also increased as a result of NAFTA because of more demand for labour intensive components from Mexico to USA industries.