North American Free Trade Agreement OBJECTIVE The objectives of this Agreement are to: establish a free trade area in accordance with this Agreement; promote regional integration through an instrument that contributes to the establishment of the Free Trade Area of the Americas (FTAA) and to the progressive elimination of barriers to trade and investment; create opportunities for economic development; eliminate barriers to trade in, and facilitate the cross-border movement of goods between the territories of the Parties; increase substantially investment opportunities in the territories of the Parties; facilitate trade in services and investment with a view to developing and deepening the Parties' relations under this Agreement; promote conditions of fair competition in the free trade area; establish a framework for further bilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement; and create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes. The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 and in accordance with applicable rules of international law. 1 | Page
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North American Free Trade Agreement
OBJECTIVE
The objectives of this Agreement are to:
establish a free trade area in accordance with this Agreement;
promote regional integration through an instrument that contributes to the establishment of the
Free Trade Area of the Americas (FTAA) and to the progressive elimination of barriers to trade
and investment;
create opportunities for economic development;
eliminate barriers to trade in, and facilitate the cross-border movement of goods between the
territories of the Parties;
increase substantially investment opportunities in the territories of the Parties;
facilitate trade in services and investment with a view to developing and deepening the Parties'
relations under this Agreement;
promote conditions of fair competition in the free trade area;
establish a framework for further bilateral, regional and multilateral cooperation to expand and
enhance the benefits of this Agreement; and
create effective procedures for the implementation and application of this Agreement, for its joint
administration and for the resolution of disputes.
The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives
set out in paragraph 1 and in accordance with applicable rules of international law.
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INTRODUCTION
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S.
and Mexico making it the world’s largest free trade area in terms of GDP. As of January 1, 2008,
all tariffs between the three countries have have been eliminated. Between 1993-2007, trade
tripled from $297 billion to $930 billion.
The North American Free Trade Agreement or NAFTA , French is an agreement signed by the
governments of the United States, Canada, and Mexico creating a trilateral trade bloc in North
America. The agreement came into force on January 1, 1994. It superseded the Canada-United
States Free Trade Agreement between the U.S. and Canada. In terms of combined purchasing
power parity GDP of its members, as of 2007 the trade block is the largest in the world and
second largest by nominal GDP comparison.
The North American Free Trade Agreement (NAFTA) has two supplements, the North American
Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on
Labor Cooperation (NAALC).
NAFTA's naming
American intellectual Noam Chomsky has argued that the only true words in the phrase "North
American Free Trade Agreement" seem to be "North America", as what is called trade is in
reality mostly restricted intra-corporate transfers of products and services. Agreement is lacking
as NAFTA was passed with a lack of democratic oversight protocols and widespread public
opposition.
Adam Smith, states in The Wealth of Nations that free trade includes the labor component as a
factor of production:
"By obstructing the free circulation of labour and stock both from employment to employment, and from
place to place, occasions in some cases a very inconvenient inequality in the whole of the advantages and
disadvantages of their different employments."
Within NAFTA official law and agreements the movement of labor is temporary and
very restrictive, especially for unskilled workers.Mexican (legal and illegal) migration to the
USA is surging, but not due to NAFTA provisions. NAFTA provisions for freedom of movement
of workers are very restrictive compared to one of the economic freedoms of the European Union,
NAFTA covers Canada, the U.S. and Mexico making it the world's largest free trade area. By
2008 almost all tariffs will have been eliminated. From 1993 (the initiation of NAFTA) to 2005,
trade increased from $297 billion to $810 billion.
The North America Free Trade Agreement, also known as NAFTA, is a trade agreement between the United States, Canada, and Mexico. NAFTA eliminated the majority of tariffs on products traded among the United States, Canada, and Mexico, and gradually phased out other tariffs over a 15-year period. The treaty also protects intellectual property rights (patents, copyrights, and trademarks), and outlines the removal of investment restrictions among the three countries. There have been positive and negative outcomes from the NAFTA agreement. Some argue that NAFTA has been positive for Mexico, which has seen its poverty rates fall and real income rise, even after accounting for the 1994–1995 economic crisis. Others argue that NAFTA has been beneficial to business owners and elites in all three countries, but has had negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness, and negative impacts on US workers in manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA has contributed to the rising levels of inequality in both the U.S. and Mexico. Some economists believe that NAFTA has not been enough to produce an economic convergence, nor to substantially reduce poverty rates. Some have suggested that in order to fully benefit from the agreement, Mexico must invest more in education and promote innovation in infrastructure and agriculture. Overall, NAFTA has not caused any trade diversion aside from the textiles and apparel industry.
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NAFTA's effects, both positive and negative, have been quantified by several economists, whose
findings have been reported in publications such as the World Bank's Lessons from NAFTA for
Latin America and the Caribbean NAFTA's Impact on North America, and NAFTA Revisited by
the Institute for International Economics. Some argue that NAFTA has been positive for Mexico,
which has seen itspoverty rates fall and real income rise (in the form of lower prices, especially
food), even after accounting for the 1994–1995 economic crisis. Others argue that NAFTA has
been beneficial to business owners and elites in all three countries, but has had negative impacts
on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness,
and negative impacts on U.S. workers in manufacturing and assembly industries who lost jobs.
Critics also argue that NAFTA has contributed to the rising levels of inequality in both the U.S.
and Mexico. Some economists believe that NAFTA has not been enough (or worked fast enough)
to produce an economic convergence, nor to substantially reduce poverty rates. Some have
suggested that in order to fully benefit from the agreement, Mexico must invest more in education
and promote innovation in infrastructure and agriculture.
According to the Department of Homeland Security Yearbook of Immigration Statistics, during
fiscal year 2006 (i.e., October 2005 through September 2006), 74,098 foreign professionals
(64,633 Canadians and 9,247 Mexicans) were admitted into the United States for temporary
employment under NAFTA (i.e., in the TN status). Additionally, 17,321 of their family members
(13,136 Canadians, 2,904 Mexicans, as well as a number of third-country nationals married to
Canadians and Mexicans) entered the U.S. in the treaty national's dependent (TD) status.[22]Because DHS counts the number of the new I-94 arrival records filled at the border, and the
TN-1 admission is valid for one year, the number of non-immigrants in TN status present in the
U.S. at the end of the fiscal year is approximately equal to the number of admissions during the
year. (A discrepancy may be caused by some TN entrants leaving the country or changing status
before their one-year admission period expired, while other immigrants admitted earlier may
change their status to TN or TD, or extend earlier granted TN status).
Canadian authorities estimated that, as of December 1, 2006, the total of 24,830 U.S. citizens and
15,219 Mexican citizens were present in Canada as "foreign workers". These numbers include
both entrants under the NAFTA agreement and those who have entered under other provisions of
the Canadian immigration law. New entries of foreign workers in 2006 were 16,841 (U.S.
Canada, Mexico and the United States established a uniform Certificate of Origin to certify that goods imported into their territories qualify for the preferential tariff treatment accorded by the NAFTA. Only importers who possess a valid Certificate of Origin may claim preferential tariff treatment for originating goods.
Language
A uniform Certificate of Origin is used in all three countries and is printed in English, French or Spanish. The Certificate shall be completed in the language of the country of export or the language of the importing country, at the exporter's discretion. Importers shall submit a translation of the Certificate to their own customs administration when requested.
Scope
A Certificate of Origin may cover a single importation of goods or multiple importations of identical goods. Certificates that cover multiple shipments are called blanket certificates and may apply to goods imported within any twelve-month period specified on the Certificate. Although a Certificate of Origin may cover goods imported over not more than a twelve-month period, it remains valid for NAFTA preference claims made up to four years from the date upon which it was signed.
A machine made in Canada qualifies for NAFTA tariff treatment and is exported with a Certificate of Origin signed on January 1, 1995. The U.S. importer does not enter the machine for consumption but instead places it in a customs bonded warehouse. He overlooks the Certificate of Origin and fails to claim NAFTA treatment for the machine upon entry into the warehouse. If the U.S. importer withdraws the machine from the warehouse for consumption on January 17, 1999, he will be barred from claiming NAFTA treatment upon withdrawal because the Certificate is over four years old and is no longer valid.
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Completion of Certificate
The Certificate of Origin must be completed and signed by the exporter of the goods. Where the exporter is not the producer, the exporter may complete the Certificate on the basis of:
knowledge that the good originates; reasonable reliance on the producer's written representation that the good
originates; or a completed and signed Certificate of Origin for the good voluntarily provided to
the exporter by the producer.
Importers' Obligations
Importers claiming NAFTA preferential tariff treatment shall make a declaration, based on a valid Certificate of Origin in their possession, on the import documentation. Where no claim for preferential tariff treatment is made at the time of importation, importers may request preferential tariff treatment no later than one year after the date on which the good was imported, provided a Certificate of Origin for the goods is obtained.
Importers must provide the Certificate to the importing country's customs administration upon request, and must submit a corrected declaration and pay the corresponding duties whenever there is reason to believe that the Certificate contained inaccurate information.
The customs administration of the importing country may deny preferential tariff treatment to the goods if the importer fails to comply with any of the customs procedures set out in Chapter Five of the NAFTA.
Importers must maintain records pertaining to the importation for five years or such longer period as may be specified by their country.
Exporters' and Producers' Obligations
Exporters or producers that prepare Certificates of Origin shall provide copies to their own customs administration upon request.
Exporters or producers that provide a Certificate of Origin must maintain records pertaining to the exportation for five years or such longer period as may be specified by their countries.
Exporters or producers that complete a Certificate of Origin shall notify all parties to whom the Certificate was given of any change that could affect its accuracy or validity.
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Diagramatic Records
NAFTA 2001
The most significant thing about this 2000 chart is that fact that despite lots of encouragement from federal and provincial governments for Canadian exporters to seek out markets in Asia, Europe and Latin America - we still do more than 87% of our business with the U.S.
Mexico - highly touted as an opportunity for us in 2001 and beyond, is the tiny slice of green in the chart to the left.
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NAFTA 2006
In the later years of the 1990's it appeared that NAFTA was responsible for Canada doing more and more trade with the U.S. - and therefore increasing our vulnerability to swings in the U.S. economy and reducing our business with the ROW (rest of the world).
However, as the U.S. economy began to slow in the "Bush" administration, Canadian companies have sought more business with the rest of the world, which is reflected in an updated chart showing Canadian exports to the U.S.
since 2001, we have done much better diversifying away from exporting mostly to the U.S. and are improving our exports to Asia-Pacific and Europe
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U.S. NAFTA trade deficit surging in 2003
U.S. NAFTA trade deficit surging in 2003
Since the U.S. entered into the North American Free Trade Agreement (NAFTA) with
Mexico and Canada, the trade deficit with these countries has grown rapidly (see chart
below). U.S. firms moved plants to Mexico and Canada to take advantage of lower wages
and new rules providing unheard of levels of protection for foreign investors. The
combined U.S. trade balance with the other two NAFTA countries (the difference
between U.S. exports and imports) was a small, stable deficit prior to NAFTA. Since
NAFTA that combined deficit has grown rapidly. U.S. imports have been growing more
rapidly than exports, so the trade deficit has expanded. When the growth of this deficit
eased in 2002, some claimed that U.S. trade with China and other lower-wage countries
was displacing NAFTA trade. Contrary to this view, the U.S. NAFTA deficit has
increased 12.2% so far this year, evidence that deficits with Mexico and Canada are a
continuing drag on U.S. growth and job creation.
Exports, which expand domestic production, increase the number of U.S. industrial
jobs, while imports, which replace goods that could have been produced in the United
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States, eliminate jobs. The rise in the U.S. deficit with Canada and Mexico from 1993
to 2000 displaced production supported by 766,000 U.S. jobs. Most of those jobs
would have been high-wage positions in manufacturing industries. The sustained
growth of this deficit suggests that NAFTA continues to eliminate more jobs in the
United States, which worsens the current economic downturn.
Further study of NAFTA by researchers in Canada and Mexico has shown that
workers in all three countries have been hurt, but for different reasons. In Mexico, real
wages have fallen sharply and there has been a sharp drop in the number of people
holding regular jobs in paid positions. Many workers have been shifted into
subsistence-level work in the "informal sector," frequently unpaid work in family
retail trade or restaurant businesses. In Canada, a decade of heightened competition
with the U.S. is eroding social investment in public spending on education, health
care, unemployment compensation, and a wide range of other public services. This
experience suggests that workers have good reasons to be concerned as we enter
NAFTA's second decade.
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What Is Barack Obama's Position on Free Trade?
Overall, Obama opposes many current trade agreements, which he says are bad for the economy because they provide perks for businesses but don't protect workers.
Obama Has Three Main Proposals:
1. Amend NAFTA - He would re-open NAFTA to beef up protection for labor and the environment.
2. Fight for Fair Trade - He opposes pending Free Trade Agreements (FTA's) with Colombia because it allows violence against labor leaders and South Korea because it restricts U.S. auto imports. He also wants to pressure the World Trade Organization to enforce current agreements and stop unfair subsidies.
3. Improve Transition Assistance - He supports Federal funding for retraining displace U.S. workers.
How Would Obama's Free Trade Position Impact the Economy?
Putting more job protection for U.S. workers in NAFTA and other FTA's may not help American
workers because it doesn't get at the source. Job outsourcing is a result of declining U.S.
competitiveness, which is itself a result of decades of the U.S. not investing in education. This is
particularly true for high tech, engineering, and science.
Opposing FTA's for two of America's closest allies, Colombia and South Korea, may damage our
relationship with them while hurting the U.S. economy. In fact, Colombia's homicide rate against
union members, and the public as a whole, has dropped 40% since 2002 thanks to a government
protection program.
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Rejection of the South Korean FTA could cause newly-elected South Korean President Lee
Myung-bak to further lose support among a population who are already upset that he agreed to
allow U.S. beef to be imported as part of the agreement. South Koreans remember the cases of
mad cow disease found in U.S. beef four years ago.
The agreement actually levels the playing field for the auto industry. Current South Korean tariffs
of 8% would be removed, as would current U.S. tariffs, which are lower at 3.5%.
NAFTA's open new markets for businesses by removing trade barriers. For example, NAFTA
increased trade from $297 billion to $810 billion. The Peterson Institute for International
Economics estimates that ending all trade barriers would increase U.S. income by $500 billion.
Opening NAFTA to renegotiation would allow Mexico to address it complaints, including
immigration reform, U.S. farm subsidies and an unfulfilled NAFTA promise to allow Mexican
commercial trucks further into the U.S.
Free trade creates more jobs than it outsources. For example, the formation of the European
Union free trade area created 300,000–900,000 net new jobs. In the U.S, 1.3 million export-
related jobs were created between 1994 and 1998.
Increasing U.S. protectionism will further slow economic growth and cause more layoffs, not
less. If the U.S. regresses and closes its borders, other countries will do the same. This could
cause layoffs among the 12 million U.S. workers who owe their jobs to exports.
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What Free Trade Issues Is Obama Missing?
One of the key obstacles to the Doha round of the World Trade Organization agreement was U.S.
agricultural subsidies. Developing countries are afraid of low-cost, subsidized U.S. farm products
flooding their markets, essentially putting family farmers out of business. Until the U.S.
significantly reduces these subsidies, further progress on this multi-lateral trade agreement is
effectively dead in its tracks.
Contrary to popular opinion, agricultural subsidies no longer go to U.S. family farms. Instead, tax
programs that were designed to help Depression-era families keep their farms are now effectively
subsidizing huge corporations who have, in turn, put these family farms out of business.
In fact, Obama's renewed pressure on the WTO to enforce other countries' subsidies could then
bring into question the subject of U.S. agricultural subsidies - still a sore point in the international
trade community. The failure of the Doha round has led to a fresh wave of bilateral trade
agreements between China, the Middle East, Latin America and Africa. Further U.S.
protectionism at this time will only increase this activity, thus pushing the U.S. economy further
out of the trade loop, and further into economic decline.
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Conclusion
The North American Free Trade Agreement (NAFTA) will not be fully implemented. However, it is evident that NAFTA has already proved its worth to the United States by playing an important and vital role in increasing consumer choice, improving market access for U.S. products, and expanding U.S. jobs supported by exports.