What is the North American Free Trade Agreement (NAFTA)?

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  2. March 14, 2013 6:15 pm

What is the North American Free Trade Agreement (NAFTA)?

What is the North American Free Trade Agreement (NAFTA)?

January 1, 1994, marked the culmination of a supreme effort among the leaders of North America’s three nations to negotiate a free trade area encompassing the continent. The North American Free Trade Agreement (NAFTA) established the world’s largest free trade area. Originating from a free trade pact between Canada and the United States in 1989, NAFTA was expanded to include Mexico. Today NAFTA covers a population of 450 million having an annual economic output of more than $17 trillion.

The concept of a free trade area is to eliminate barriers to commerce, investment, and economic development among member nations. In the decades following its creation, NAFTA has been implemented to provide cost-effective, time-efficient cross-border movement of goods and services among these countries. Examples of barriers eliminated include import and export duties on goods and services, bureaucratic red-tape processing through customs, excessive and inconsistent labeling and packaging restrictions, and infrastructure and transportation variances.

Since NAFTA, trade among North America’s countries has more than tripled, rising from $297 billion in 1993 to $946 billion in 2008. Investment in United States business sectors rose 117 percent during this same period, compared with a mere 45 percent increase in the 15 years prior to 1993. With tariffs eliminated on agricultural products, Mexico has become the top United States export market for beef, rice, soybean meal, corn sweeteners, apples, and dry beans, its second largest for corn, soybeans, and oils, and its third largest for pork, poultry, eggs, and cotton. A side benefit of NAFTA has been to encourage continued cooperation among North America’s nations, resulting in parallel agreements to improve and enforce labor and environmental laws.


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