NAFTA, or the North American Free Trade Agreement is a free trade pact among the United States, Mexico and Canada, which was never ratified as a treaty by the U.S. Senate. Instead, it was passed merely with a simple majority of the Democrat-controlled Congress in 1993, and signed into law by the Democrat President Bill Clinton in December 1993. Effective as of January 1, 1994, it can be repealed or modified by any other federal law.
NAFTA was so sloppy as a deal that, as Donald Trump pointed out in his speech to Detroit automakers on Sept. 27, 2023, it contains flagrant typos that no one bothered to correct despite having many years to do so.
NAFTA subjected the United States to the jurisdiction of a foreign tribunal for resolving disputes arising under the "free trade" zone created by the law, which is the world's biggest free-trade area. It requires the elimination of every trade barrier between the signers for fifteen years, and includes agreements on the environment and labor. This gave Mexico access to U.S. and Canadian markets, and vice-versa. Its most contentious consequence in 2011 is whether trucks from Mexico will have full access to American highways.
In 2018, NAFTA was proposed to be replaced by the USMCA agreement.
NAFTA followed the Free Trade Agreement (FTA) of 1989 between the U.S. and Canada. NAFTA was originally negotiated by President George H. W. Bush and was an issue in the 1992 presidential election. Bush and Bill Clinton supported NAFTA but independent Ross Perot led the opposition. Once elected Clinton worked with Republicans and business to overcome strong opposition from liberals, environmentalists and labor unions. The dire predictions of the opposition never came to pass.
NAFTA marked a major change in US-Mexican relations in the post-Cold War era and showed an important tendency in economic globalization. By establishing a relationship of economic cooperation and collaboration and practicing economic liberalization and integration, the United States, Canada, and Mexico all benefited. Furthermore, NAFTA propelled reform of the political system in Mexico and created a chance for Mexico to open up to the world and establish a foreign-oriented economy.
By its 25th year of existence, NAFTA had resulted in 5 million lost manufacturing jobs and stagnant wages.
NAFTA greatly boosted Mexico's exports to the U.S. and made the country more attractive for foreign investment. It also helped it to weather the 1994-1995 peso crisis by ensuring access to U.S. and Canadian markets. There has been a growth in the other states of Mexico of large multinational companies whose maquiladora assembly operations have gained an increasingly larger proportion of Mexico's export production. Meanwhile, the proportion of production by smaller manufacturing firms and other producers has steadily shrunk. Mexico continues to be an importer of technology and innovative processes, and likewise remains heavily dependent on the performance of the U.S. economy. Manufacturing remains concentrated in the Federal District, Jalisco and Nuevo León. Mexico's inadequate road system, particularly in the central and southern states, is a serious impediment to attracting foreign investment in those regions, as well for exploiting the full potential of NAFTA.
Volume of trade
NAFTA created the world's largest free trade area, which now links 444 million people producing $17 trillion worth of goods and services.
Trade between the United States and its NAFTA partners has soared since the agreement entered into force. U.S. goods and services trade with NAFTA totaled $1.0 trillion in 2007 (latest data available). Exports totaled $452 billion; Imports totaled $568 billion. The U.S. goods and services trade deficit with NAFTA was $116 billion in 2007.
US Exports to Canada and Mexico
Canada and Mexico were the top two purchasers of U.S. exports in 2008. (Canada $261.2 billion and Mexico $151.2 billion). Their main purchases were:
- Machinery ($63.5 billion), Auto parts ($59.5 billion), Electrical Machinery ($49.2 billion), Oil ($27.9 billion), Plastics ($22.3 billion), and agricultural products ($32.3 billion).
Imports to US
The NAFTA countries were the largest and third largest suppliers of goods imported to the United States in 2008. (Canada $339.5 billon, and Mexico $215.9 billion). China was second.
They sold Americans their crude oil ($157.8 billion), autos ($79.7 billion), electrical nachinery ($63.5 billion), machinery ($46.5 billion), and agricultural products ($28.9 billion), especially fresh vegetables ($3.9 billion), snack foods, ($3.4 billion), live animals ($2.3 billion), processed fruit and vegetables ($2.0 billion), and wine and beer ($1.9 billion).
- Buhner-Thomas, Victor, et al. Regional Integration in Latin America and the Caribbean: The Political Economy of Open Regionalism. (2001) 322 pp.; important essays by scholars
- Cameron, Maxwell A., and Brian W. Tomlin. The Making of NAFTA: How the Deal Was Done (2000), scholarly study.
- Caulfield, Norman. NAFTA and Labor in North America (2009)
- Chambers, Edward J., and Peter H. Smith, eds. NAFTA in the New Millennium. (2002) 520 pp. scholarly studies on trade, labor, migration, transport, and the environment.
- Binder, John (February 5, 2019). Fact Check: Trump Is Right, NAFTA a ‘Catastrophe’ for American Workers. Breitbart News. Retrieved February 6, 2019.
- Byas, Steve (November 8, 2017). Cruz Support for NAFTA Contradicts His “Passion” for National Sovereignty. The New American. Retrieved November 25, 2017.
- Binder, John (January 16, 2019). NAFTA at 25: Nearly 5M American Manufacturing Jobs Lost, Stagnant Wages. Breitbart News. Retrieved January 16, 2019.
- US Trade Representative, "NAFTA",detailed statistics