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:
Facilitate the trade and investment in all three countries by removing trade tariffs
and trade barriers.
Promote fair trade competition within the 3 countries.
Increase investments within the NAFTA zone.
Protect intellectual property within each territory.
Provide resolution procedures in times of disputes.
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.
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
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
Greater choice of goods for Canadian consumers.
Canada growth will help to address any government deficits.
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
Locomotive Cars & rail cars
Eliminated by 1998
Wood & paper
Eliminated by 2003
Boats and drilling platforms
Other cars & coaches
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