North American Free Trade Agreement
North American Free Trade Agreement
( NAFTA )
I. Scope





NAFTA Population:
15 Nation EU Population:
NAFTA GNP:
EUROPE GNP:
Size of Trade Relationships:
 U.S./Canada:
 U.S./Mexico:
 Canada/Mexico:
387 million
373 million
$8 trillion
$8 trillion
$406 billion
$248 billion
$ 20 billion
Top Ten 2000 U.S. Trading
Partners ($ billions)
Country
2-2
U.S. Exports
Canada
Mexico
Japan
China
Germany
United Kingdom
South Korea
Taiwan
France
Singapore
Irwin/McGraw-Hill
$176.4
111.7
65.3
16.3
29.3
41.5
27.9
24.4
21.0
17.4
U.S. Imports
Total
Surplus/
Deficit
$229.2
135.9
146.5
100.0
558.7
43.5
40.3
40.5
29.0
19.6
$405.6
247.6
211.8
116.3
88.0
85.0
68.2
64.9
50.0
37.0
-$52.8
-24.2
-81.3
-83.8
-29.5
-1.9
-12.4
-16.1
-8.0
-2.2
Copyright©2002 by The McGraw-Hill Companies, Inc. All rights reserved.
NAFTA
II.


History
U.S./Canada Free Trade Agreement
signed on January 2, 1988
Impacts on the Agreement:
 Elimination of duties
 Direct investment in the other country made
easier
 Easier to market services in the other country
 Provides dispute resolution mechanism


USCFTA not without controversy
USCFTA consistent with GATT
NAFTA
III. General Reasons for Free Trade
Agreements
- 1. Limits on GATT
- 2. Allows for specialization in terms of
comparative advantage
- 3. Increases potential exports for all parties
IV.


Enter Mexico (NAFTA)
Political Change
Skyrocketing Trade
NAFTA
V.
Advantages of NAFTA for Mexico
In spite of being resource rich, Mexico’s
population growing faster than the number of jobs.
Needs investment, technology, and exports to spur
the economy.
VI. Advantages of NAFTA to U.S.

Access to Mexican Labor and Markets

Note: all three nations need the agreement to
compete more effectively in world markets
NAFTA
VII. Primary Objections to NAFTA
- 1. Fears of Lost Jobs (U.S./Canada)
- 2. Exploitation of Mexican Labor
- 3. Environmental Laws
- 4. Fears of Loss of Cultural Identity
(Canada/Mexico)
What NAFTA Will Do
- 1. Help Open Mexican Market
- 2. Increase Trade
- 3. Lower Prices
- 4. More Competitive Industries (Globally)
What NAFTA Will Not Do
- 1. 50% N.A. Origin Needed to Qualify
- 2. Decrease Paperwork
- 3. Eliminate Technical Standards
- 4. Lead to Standardized Transportation
 Classifications/Groups
- Group of 7 “Industrialized”
- NIC’s
- LDC’s
 Market Characteristics
- Purchasing Power Parities
 Policy Toward Foreign Investment
-Varies by country