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Niles Bosworth

on 24 April 2017

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What is NAFTA?
Trilateral free-trade deal
Came into force in January 1994
Signed by President Bill Clinton, Mexican president Carlos Salinas, and Canadian prime minister Jean Chrétien
The central point of the agreement is to eliminate most tariffs on products traded among the US, Mexico, and Canada
The terms of the agreement called for these tariffs to be phased out gradually, and the final aspects of the deal weren't fully implemented until January 1, 2008.
Swept away import tariffs in several industries: agriculture was a major focus, but tariffs were also reduced on items like textiles and automobiles.
Implemented intellectual-property protections, established dispute-resolution mechanisms, and set up regional labor and environmental safeguards, though some critics now lobby for stronger measures on this front.
How do economists assess NAFTA's economic impact?
Designed to promote economic growth by spurring competition in domestic markets and promoting investment from both domestic and foreign sources.
Focused on labor-market dislocations, and warned that the United States would experience sharp job losses as companies moved production to Mexico to lower costs. But this effect has proved to be modest for the US because total trade with Mexico and Canada account for a small percentage of the U.S. economy.
Many trade experts say that in the long term, free-trade deals such as NAFTA produce benefits despite some painful short-term costs such as the movement of some jobs and industries across borders. But according to at least one major study, the benefits are limited.
Twenty years after its implementation, NAFTA...
helped boost intraregional trade between Canada, Mexico, and the United States.
Fallen short of generating the jobs and the deeper regional economic integration its advocates promised decades ago
Trade relations have broadened substantially, and U.S. manufacturers created supply chains across North America that have made companies more globally competitive
These factors may have stimulated economic growth; Canada has expanded at the fastest average rate and Mexico at the slowest.
U.S. trade with Mexico was growing before NAFTA's implementation, and would likely have continued to grow with or without the deal on a scale that "dwarfs the effects" of NAFTA itself;

The direct effect of NAFTA on U.S.-Mexico trade is fairly small, and thus the direct impact on the U.S. labor market is also small;

The deal has only expanded U.S. GDP "very slightly," with a similarly small and positive effect on the Canadian and Mexican economies

NAFTA impact on the U.S.
Supporters of NAFTA, and many economists, see a positive impact on U.S. employment and note that new export-related jobs in the United States pay 15 to 20 percent more on average than those focused on domestic production.
NAFTA "forced workers into more direct competition with each other, while assuring them fewer rights and protections." grand promises made by NAFTA's proponents remain unfulfilled" twenty years after implementation and resulted in the loss of one million U.S. jobs by 2004.
Unknown promise of NAFTA that the treaty would narrow the gap between the per capita incomes of Mexico, the United States, and Canada.
Per capita income in Mexico rose at an annual average of 1.2 percent over the past two decades, from $6,932 in 1994 to $8,397 in 2012, far slower than Latin American countries such as Brazil, Chile, and Peru.
Experts say trade liberalization between Mexico and the United States has had positive consequences for all Mexicans, and not just Mexican business interests.
NAFTA impact on Canada
Canada has seen the strongest gains among the three NAFTA countries, though, again, it is difficult to attribute direct causation, particularly due to the fact that Canada and the United States had a free-trade deal that was in place before the NAFTA. Canada is the leading exporter of goods to the United States, U.S. and Mexican investments in Canada have tripled, and Canada has added 4.7 million new jobs since 1993.
NAFTA's biggest economic effect on U.S.-Canada trade has been to increase bilateral agricultural flows.
Canada is the leading importer of U.S. agricultural products, and U.S. agricultural exports to Canada roughly doubled between 1994 and 2003. The U.S. Department of Agriculture offers a sector-by-sector review of U.S.-Canada trade since NAFTA's implementation, which shows broad increases in trade in several sectors.
NAFTA Impact on Mexico


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