In 1994, the North American Free Trade Agreement (NAFTA) came into effect, creating one of the worlds

largest free trade zones and laying the foundations for strong economic growth and rising prosperity for Canada, the United States, and Mexico. Since then, NAFTA has demonstrated how free trade increases wealth and competitiveness, delivering real benefits to families, farmers, workers, manufacturers, and consumers. The NAFTA partners have created this to provide Canadians, Americans, and Mexicans with information about how NAFTA works and the many ways in which it has improved the lives of North Americans.
The North American Free Trade Agreement (NAFTA) is a comprehensive trade agreement that sets the rules of trade and investment between Canada, the United States, and Mexico. Since the agreement entered into force on January 1, 1994, NAFTA has systematically eliminated most tariff and non-tariff barriers to free trade and investment between the three NAFTA countries.

HOW NAFTA WORKS

NAFTA makes it easier for corporations in these three countries (the US, Canada, and Mexico) to invest in factories and other facilities in any of the three countries. Lets say that a US company invests in a factory in Mexico. This creates a demand for labor in Mexico. But at the same time, it does two other things. Local small enterprises in Mexico are driven out of business, ruining local profit centers. The profits for the foreign investors do not stay in Mexico, where the investment was made. Second, the new facilities, do not hire as many workers as are displaced by the switch from local labour to new technology. They pay more to each worker, but they pay to fewer workers, especially when farms are mechanized. (Ive mentioned the formula in class several times: one medium-sized tractor displaces 65-80 farmworkers in poor countries.) They also change the character of the local economy, essentially eliminating subsistence farming and non-cash exchange. If you dont draw a wage, you are driven into poverty since you cant feed yourself and you cant exchange your labour for anything except cash. So, for awhile (actually only a few years), the increased business created by international trade makes the economies of all countries involved look good. It is an illusion because only corporations are doing well; workers in all countries are getting lower wages, and small businesses that depend on workers spending their money in local shops, bars, and restaurants are getting squeezed. Then other countries step in (Malaysia, Thailand, China, etc.) and offer lower wages to foreign investors. The corporations move their facilities to those countries. This has a multiplier effect. First, many of the Mexicans who went into the factories lose their jobs. But the local businesses have also been ruined, so there is

no traditional job to which to return. This also means that Mexicans can no longer buy the products being exported from the US and Canada. So jobs are lost in the US and Canada, especially the jobs that depended on producing exports. Each countrys economy is hurt in the long run. Only the corporate investors, who are not loyal to any country, make outlike bandits.

History The United States, Canada and Mexico signed off on NAFTA in December of 1992 on the condition that each country's respective legislature approved the agreement. Originally, the agreement was drafted between President Bush (senior), Mexican President Carlos Salinas de Gortari and Canada's Prime Minister, Brian Mulroney. The actual ratification of the agreement in the United States did not occur until November 20, 1993, under the Clinton Administration. Opponents to NAFTA expressed concerns regarding environmental and labor issues should the agreement be ratified. It was at this time that President Clinton tacked on the supplemental NAAEC and the NAALC addendum agreements. The bombing attack of September 11, 2001 saw a third supplement added to the NAFTA agreement. The Security and Prosperity Partnership of North America was added to further unite the three countries on issues of national security.

Features
The NAFTA agreement, for the most part, removed import taxes, or tariffs, for goods shipped between the three countries. The union of the three countries in this manner makes this north American sector the world's largest free trade area in regards to gross domestic product. The NAFTA agreement is the opportunity for increased investment opportunities, procedures for settling trade disputes and the promoting of fair competition between the countries. The agreement remains in place for 15 years, meaning the new president for 2009 will play a part in deciding whether the NAFTA agreement is reinstated.

Effects
In terms of cause and effect, opinions vary as to what effects the NAFTA agreement has had on each country's economic status. Much has happened within each respective landscape since the agreement came into being; some good, some bad. One of the most controversial of issues has to do with the increased number of illegal, Mexican immigrants entering the United States since the agreement was formed. Statistics report that there were 2 1/2 illegal Mexican immigrants in the United States in 1995. Since that time, eight million illegal immigrants have gained entry into the country. NAFTA critics attribute this increase to Mexican farmers being forced out of business because of cheaper imports brought in from the U.S. Another issue raised as an effect of NAFTA was the mass relocation of U.S. manufacturing plants to Mexico. Companies relocated to reduce payroll cost---wages, benefits and insurance. As a result, millions of American jobs have been eliminated. Manufacturing plants in Mexico pay workers of a fraction of what their American counterparts received. Companies were also free of costly regulation standard requirements imposed by American law.

Advantages
It sort of works by not doing anything. NAFTA means you're free to buy something from Mexico or Canada, without the government stepping in and stopping you, limiting your purchase, punishing you, or taxing you. In the absence of a free-trade agreement such as NAFTA, one of those bad things will likely happen to you and the government will step on your face if you dare to exercise what might appear to be an obvious freedom, and import something from another country.