North American Free Trade Agreement
NAFTA (North American Free Trade Agreement) was passed in 1994. It is a trade agreement
between the U.S., Mexico and Canada that will decrease tariffs and eliminate trade restrictions
between the three. The hope is that by decreasing trade barriers that all three countries’
economies will improve and become interdependent.
Key Terms
tariff – a tariff is a tax applied on imported goods. A tariff makes imported goods more
expensive, thus effectively giving a boost to domestic producers who do not have to pay
tariffs and thus are often able to charge lower prices to consumers.
trade Balance – The relationship between the monetary value of a country’s total exports
and imports either overall or with a specific country.
trade deficit – A trade deficit occurs when the monetary
value of a country’s imports exceeds the value of its exports.
A trade deficit can apply to a country’s trade relationship
overall or to its relationship with a specific other country.
Import (buy) more than Export (sell)
trade surplus - A trade surplus occurs when the monetary
value of a country’s exports exceeds the value of its imports.
A trade surplus can apply to a country’s trade relationship
overall or to its relationship with a specific other country.
Export (sell) more than Import (buy)
GDP – Gross domestic Product GDP measures the total output of goods and services
produced within the borders of a country. It is the most commonly used indicator of overall
economic performance. The U.S. has the world’s largest annual GDP-about 7 trillion
dollars in 1996. Annual GDP growth rates rarely top 5% in developed (mature) economies
such as the U.S. and Canada, but they can easily approach 10% in fast growing
(developing) countries such as Chile, Brazil and Malaysia.
production sharing – Production sharing is when parts are made in one or more countries
and then assembled in another country. If parts made in the U.S. are assembled in another
country, tariffs are only applied to the value added.
Maquiladoras – Maquiladoras are factories built along the U.S.-Mexico border to take
advantage of cheap labor.
Top Five Trading Partners with the U.S.
2004
2012
Canada
Canada
Mexico
China
China
Mexico
Japan
Japan
Germany
Germany
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U.S. TRADE BALANCE WITH MEXICO
Year
Exports
Imports
Balance
2015
236,000
295,000
-49,200
2006
134,167
198,259
-64,092
2004
110,835
155,902
-45,067
2002
97,470
134,616
-37,146
2000
111,349
135,926
-24,577
1998
78,773
94,629
-15,856
1996
56,792
74,297
-17,506
1994
50,844
49,494
1,350
1992
40,592
35,211
5,381
1990
28,279
30,157
-1,878
Note: All figures in millions of US Dollars
Source: http://www.census.gov/foreigntrade/balance/c2010.html#2015
Most of what is traded between the U.S. and Mexico are automobiles, automobile
parts and accessories, electrical equipment and other machine equipment.
U.S. TRADE BALANCE WITH CANADA
Year
Exports
Imports
Balance
2015
280,327
295,190
-13,864
2006
230,580
303,416
-72,836
2004
189,880
256,360
-66,480
2002
160,923
209,088
-48,165
2000
178,941
230,838
-51,897
1998
156,604
173,256
-16,653
1996
134,210
155,893
-21,682
1994
114,439
128,406
-13,967
1992
90,594
98,630
-8,036
1990
83,674
91,380
-7,706
Note: All figures in millions of US Dollars
Source: http://www.census.gov/foreigntrade/balance/c1220.html
FYI - Canada and Mexico are the top two countries from which we import our
petroleum
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