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North American Free Trade Agreement

NAFTA was signed in 1991, became effective in January 1994. As of 2016, NAFTA comprised a market with 480 million consumers and a GDP of around $21 trillion.

As a free trade agreement, NAFTA has eliminated all tariffs and nontariff trade barriers on goods originating within North America. The agreement also called for liberalized rules regarding government procurement practices and the granting of subsidies. Other provisions dealt with issues such as trade in services, intellectual property rights, and standards of health, safety, and the environment.

EFFECTS OF NAFTA 

(1) Since NAFTA came into effect, trade among the three participating nations has increased markedly, with the greatest gains occurring between Mexico and the United States. Today, the United States exports more to Mexico than it does to Britain, France, Germany, and Italy combined. In fact, Mexico is the third largest source of US imports (behind China and Canada) and is the second largest market for US exports (behind Canada).Overall, NAFTA has helped trade among the three countries to grow from $297 billion in 1993 to around $1.6 trillion. Since the start of NAFTA, Mexico’s exports to the United States have jumped to around $280 billion, and US exports to Mexico have grown to more than $226 billion. Over the same period, Canada’s exports to the United States more than doubled to nearly $332 billion, and US exports to Canada grew to $300 billion. As these numbers suggest, the United States has developed a trade deficit with Canada and Mexico. Canada and Mexico traded very little with each other before NAFTA. But within a few years, Canada’s exports to Mexico grew to $3.9 billion and Mexico’s exports to Canada grew from $1.5 billion to $5.2 billion.

(2) The agreement’s effect on employment and wages is not as easy to determine. The US Trade Representative Office claims that exports to Mexico and Canada support 2.9 million US jobs (900,000 more than in 1993), which pay 13 to 18 percent more than national averages for production workers. But the AFL-CIO group of unions disputes this claim; it argues that, since its formation, NAFTA has cost the United States more than one million jobs and job opportunities.

(3) In addition to claims of job losses, opponents claim that NAFTA has damaged the environment, particularly along the United States–Mexico border. Although the agreement included provisions for environmental protection, Mexico is making some headway in dealing with the environmental impact of greater economic activity. The US and Mexican federal governments have invested several billion dollars in environmental protection efforts since the creation of NAFTA.

US and Canada claim victory as NAFTA saved at the last

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#GME | The United States and Canada have reached a deal to replace NAFTA after more than a year of negotiations. The deal's new name will be the US-Mexico-Canada Agreement (USMCA). @SandforAlasdair joins us in the studio for more on the agreement.

Donald Trump has repeatedly threatened to rip up NAFTA outright or break it up into little pieces. The US president has regularly called it a “disaster” for American workers and manufacturers.

The United States and Canada have reached an 11th hour deal to keep alive a three-country trade alliance with Mexico and prevent a disruptive break-up.

After more than a year of negotiations, the 25-year-old North American Free Trade Agreement (NAFTA) is to be replaced by a new United States-Mexico-Canada Agreement (USMCA).

The deal comes despite Donald Trump’s multiple trade wars, which have seen the US president impose taxes on imports from both Canada and Mexico, bringing retaliation in kind.

The US had imposed a deadline of midnight on Sunday, September 30, 2018 for differences to be settled. In the end both sides made concessions, and both governments have welcomed the outcome.

USMCA: Who are the winners and losers of the ‘new NAFTA’?

Trump and Trudeau can tout this as a major victory ahead of key elections in their countries. It’s a lot less clear whether ‘NAFTA 2.0’ is good for Mexico and U.S. automakers.

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NAFTA deal ends, replaced with USMCA

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The United States, Mexico and Canada agreed to a new deal with more restrictive rules in exporting.

October 1 at 9:53 AM _ Washington Post

The United States, Canada and Mexico finalized a sweeping new trade deal late Sunday, just hours before their Oct. 1 deadline. President Trump was up early Monday tweeting that the agreement is “a great deal for all three countries,” and Prime Minister Justin Trudeau said Sunday night that it was a “good day for Canada.”

The deal is expected to take effect around Jan. 1, 2020. Congress has to approve it, a process that will take months, but confirmation looks likely, given that Republicans are pleased Canada got on board and some Democrats are pleased with the stronger labor provisions.

Here’s a look at who’s smiling — and who’s not — as the world sees this news.

Winners:

President Trump. He got a major trade deal done and will be able to say it’s another “promise kept” to his voters right before the midterm elections. And he won the messaging game — he persuaded Canada and Mexico to ditch the name “NAFTA,” for North American Free Trade Agreement, which he hated, and to instead call the new agreement “USMCA,” for United States-Mexico-Canada Agreement. It’s not a total trade revolution, as Trump promised, but USMCA does make substantial changes to modernize trade rules in effect from 1994 to 2020, and it give some wins to U.S. farmers and blue-collar workers in the auto sector. Trump beat his doubters, and his team can now turn to the No. 1 trade target: China.

Prime Minister Justin Trudeau. There might not be a lot of love lost between Trump and Trudeau, but in the end, Trudeau didn’t cave much on his key issues: dairy and Chapter 19, the treaty’s dispute resolution mechanism. Trudeau held out and got what he wanted: Canada’s dairy supply management system stays mostly intact, and Chapter 19 remains in place, a win for the Canadian lumber sector. On dairy, Canada is mainly giving U.S. farmers more ability to sell milk protein concentrate, skim milk powder and infant formula. On top of the substantive issues, Trump went out of his way to criticize the Canadian negotiating team in the final days of deliberations, which Trudeau can play up as a sign of just how hard his staff fought on this deal.

Labor unions. This agreement stipulates that at least 30 percent of cars (rising to 40 percent by 2023) must be made by workers earning $16 an hour, about three times the typical manufacturing wage in Mexico now. USMCA also stipulates that Mexico must make it easier for workers to form unions. The AFL-CIO is cautiously optimistic that this truly is a better deal for U.S. and Canadian workers in terms of keeping jobs from going to lower-paying Mexico or to Asia, although labor is looking carefully at how the new rules will be enforced. It’s possible this could accelerate automation, but that would take time.

U.S. dairy farmers. They regain some access to the Canadian market, especially for what is known as “Class 7” milk products such as milk powder and milk proteins. The United States used to sell a lot of Class 7 products to Canada, but that changed in recent years when Canada started heavily regulating this new class. USMCA also imposes some restrictions on how much dairy Canada can export, a potential win for U.S. dairy farmers if they are able to capitalize on foreign markets.

Stock market investors. A major worry is over, and the U.S. stock market rallied Monday with the Dow gaining nearly 200 points.

Robert E. Lighthizer. Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin couldn’t get major trade deals done for the president, but U.S. Trade Representative Lighthizer did. He led negotiations with South Korea on the revamped U.S.-South Korea trade deal (KORUS) that the president just signed, as well as on the “new NAFTA.” Lighthizer is proving to be the trade expert closest to Trump’s ear.

Losers:

China. Trump is emboldened on trade. A senior administration official said Sunday that the U.S.-Canada-Mexico deal “has become a playbook for future trade deals.” The president believes his strategy is working, and he’s now likely to go harder after China because his attention won’t be diverted elsewhere (at least on trade matters).

U.S. car buyers. Economists and auto experts think USMCA is going to cause car prices in the United States to rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore. It’s unclear how much prices could rise (estimates vary), but automakers can’t rely as heavily on cheap Mexican labor now and there will probably be higher compliance costs.

Canadian steel. Trump’s tariffs on Canadian steel and aluminum remain in place for now, something Trudeau has called “insulting” since the two countries are longtime allies with similar labor standards.

Unclear:

Mexico. America’s southern neighbor kept a trade deal in place, but it had to make a lot of concessions to Trump. It’s possible this could stall some of Mexico’s manufacturing growth, and it’s unclear whether wages really will rise in Mexico because of this agreement. Big energy companies can also still challenge Mexico via Chapter 11, something that could constrain Mexico’s new government as it aims to reform energy policies.

Ford, GM, Chrysler and other big auto companies. There’s relief among auto industry executives that the deal is done, but costs will be high for big car companies: The steel tariffs are still in place on Canada; more car parts have to come from North America (not cheaper Asia); and more car components have to be made at wages of $16 an hour. It remains to be seen how car companies are able to adjust and whether this has long-term ramifications for their bottom lines.

Big business. Many business groups are relieved that Trump got a trilateral deal and didn’t end up tearing up NAFTA entirely, as he had threatened to do. And they like a lot of the trademark and patent provisions. But the details of USMCA include some losses for big business. Some regulatory compliance costs will probably rise, especially for automakers, and big business lost Chapter 11, the investor dispute settlement mechanism that companies have used to sue Canadian and Mexican governments (the one exception is that energy and telecommunications firms still get a modified Chapter 11 with Mexico).

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