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Return from North American Free Trade Agreement (NAFTA) to Importing to Canada

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North American Free Trade Agreement (NAFTA)

NAFTA Background

The North American Free Trade Agreement (NAFTA) was signed between the counties of the United States, Canada and Mexico.  The agreement went into effect on January 1, 1994.  This came after the United States and Canada signed a Free Trade Agreement (FTA) between the two countries in 1989.

The objectives of the North American Free Trade Agreement (NAFTA) were:

1. Facilitate the trade and investment in all three countries by removing trade tariffs and trade barriers.  
2. Promote fair trade competition within the 3 countries.
3. Increase investments within the NAFTA zone.
4. Protect intellectual property within each territory.
5. Provide resolution procedures in times of disputes.
6. Provide a framework to expand and enhance benefits of NAFTA.

It is hoped that the agreement will generate long term economic growth for all three countries.   NAFTA leveraged many of the agreements already in place from the (FTA).

NAFTA Tariff Elimination

The Canada-United States agreement eliminated virtually all tariffs between the two countries by 1998.  This preferential tariff rule only applies to goods originated from Canada or the United States.  It does not apply to goods manufactured in other countries and shipped through these countries.    

NAFTA Quality Standards & Labour Mobility

Quality Standards & NAFTA

The NAFTA rule on quality encourages standardization in testing such that quality standards do not become an impediment to free trade.

Labour Mobility

Prior to NAFTA, it was difficult for Canadian sales and service workers to go to the United States temporarily and service their customers.  Under the NAFTA agreement, this barrier was removed.

Advantages and Disadvantages of NAFTA for Canada

Advantages

• Access to U.S. and Mexico, a market 15X larger than Canada.
• Competitive advantage in key industries (fisheries, chemical, energy, steel) will lead to expansion under NAFTA.
• Availability of U.S. Technology.
• Potential of the U.S. government as a customer.
• Canadian Banks capitalizing off Mexico's improved financial position.
• Improve strength in competition versus other global pacts such as EU or Pacific Rim nations.
• Greater choice of goods for Canadian consumers.
• Canada growth will help to address any government deficits.

Disadvantages

• Loss of Canadian jobs with plants moving to the U.S.
• Further infiltration of American culture into Canada.
• Canadian government linked to counterparts in U.S. and Mexico resulting in less freedom.
• North American corporations will consolidate Canadian marketing and administration offices in the U.S.
• Losses in weaker Canadian industries such as wine and textiles.

Seventeen years after the rollout of NAFTA, all three nations of United States, Canada and Mexico have reaped the benefits of the North American Free Trade Agreement (NAFTA).  All three nations have significantly grew their trade with one another.

A similar relationship also hold true for Mexico with the United States and Canada.  NAFTA provided the agreement to eliminate all the tariffs between these three nations by 2003. The categories of A through D were used to determine how quickly the category's tariffs were going to be eliminated. The Country of Origin rule determines a product's NAFTA eligibility.  If materials from other countries are used in the product, then the materials must be transformed in the final product within the three countries in order for it to benefit from free trade tariffs.

Here is an example of NAFTA's elimination schedule

Eliminated by 1994:

• Health & medical items
• Chemicals and plastics
• Fertilizers
• Construction equipment
• Locomotive Cars & rail cars

Eliminated by 1998

• Air conditioning
• Resins
• Laundry soaps
• Wood & paper
• Cooper wire
• Hydraulic turbines

Eliminated by 2003

• Pharmaceuticals
• Boats and drilling platforms
• Bicycles equipment
• Other cars & coaches
• Furniture equipment
• Stainless steel

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