INTRODUCTION

NAFTA is short for the North American Free Trade Agreement. NAFTA
covers Canada, the U.S. and Mexico making it the worlds largest free trade area in
terms of GDP. As of January 1, 2008, all tariffs between the three countries have have
been eliminated. Between 1993-2007, trade tripled from $297 billion to $930 billion.
The North American Free Trade Agreement or NAFTA , French is an
agreement

signed

by

the

governments

of

the United

States, Canada,

andMexico creating a trilateral trade bloc in North America. The agreement came into
force on January 1, 1994. It superseded the Canada-United States Free Trade
Agreement between the U.S. and Canada. In terms of combined purchasing power
parity GDP of its members, as of 2007 the trade block is the largest in the world and
second largest by nominal GDP comparison.
The North American Free Trade Agreement (NAFTA) has two supplements,
the North American Agreement on Environmental Cooperation (NAAEC) and
the North American Agreement on Labor Cooperation (NAALC).

NAFTA'S NAMING
American intellectual Noam Chomsky has argued that the only true words in the
phrase "North American Free Trade Agreement" seem to be "North America", as what
is called trade is in reality mostly restricted intra-corporate transfers of products and
services. Agreement is lacking as NAFTA was passed with a lack of democratic
oversight protocols and widespread public opposition.
Adam Smith, states in The Wealth of Nations that free trade includes the labor
component as a factor of production:
"By obstructing the free circulation of labour and stock both from employment
to employment, and from place to place, occasions in some cases a very inconvenient

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inequality in the whole of the advantages and disadvantages of their different

employments."
Within NAFTA official law and agreements the movement of labor is
temporary and very restrictive, especially for unskilled workers.Mexican (legal and
illegal) migration to the USA is surging, but not due to NAFTA provisions. NAFTA
provisions for freedom of movement of workers are very restrictive compared to one
of the economic freedoms of the European Union, the freedom of movement for
workers.

WHEN WAS NAFTA STARTED?

NAFTA was signed by U.S. President George H.W. Bush, Mexican President
Salinas, and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the
legislatures of the three countries in 1993. The U.S. House approved it by 234 to 200
on November 17 and the Senate by 60 to 38 on November 20. It was signed into law
by President Bill Clinton on December 8, 1993 and entered force January 1,1994.
Although it was started by President Bush, it was a priority of President Clinton's, and
its passage is considered one of his first successes. (Source: History.com, NAFTA
Signed into Law, December 8, 1993.

HOW WAS NAFTA STARTED?

The impetus for NAFTA actually began with President Ronald Regan, who
campaigned on a North American common market. In 1984, Congress passed the
Trade and Tariff Act. This is important because it gave the President "fast-track"
authority to negotiate free trade agreements, while while only allowing Congress the
ability to approve or disapprove, not change negotiating points. Canadian Prime
Minister Mulroney agrees with Reagan to begin negotiations for the Canada-U.S. Free
Trade Agreement, which was signed in 1988, went into effect in 1989 and is now
suspended due to NAFTA. (Source: NaFina, NAFTA Timeline)

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Meanwhile, Mexican President Salinas and President Bush began negotiations

for a liberalized trade between the two countries. Prior to NAFTA, Mexican tariffs on
U.S. imports were 250% higher than U.S. tariffs on Mexican imports. In 1991,
Canada requests a trilateral agreement, which then led to NAFTA. In 1993, concerns
about liberalization of labor and environmental regulations led to the adoption of two
addendums to NAFTA.

WHY WAS NAFTA FORMED?

Article 102 of the NAFTA agreement outlines its purpose:

Grant the signatories Most Favored Nation status.

Eliminate barriers to trade and facilitate the cross-border movement of

goods and services.

Promote conditions of fair competition.

Increase investment opportunities.

Provide protection and enforcement of intellectual property rights.

Create procedures for the resolution of trade disputes.

Establish a framework for further trilateral, regional and multilateral

cooperation to expand NAFTA's benefits.

BACKGROUND
In 1988 Canada and the United States signed the Canada-United States Free
Trade Agreement. The American government then entered into negotiations with the
Mexican government for a similar treaty, and Canada asked to join the negotiations in
order to preserve its perceived gains under the 1988 deal. The international climate at
the time favoured expanding trade blocs, and the Maastricht Treaty which created
theEuropean Union was signed in 1992.

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Following diplomatic negotiations dating back to 1991 between the three

nations, the leaders met in San Antonio, Texas, on December 17, 1992, to sign
NAFTA. U.S. President George H.W. Bush, Canadian Prime Minister Brian
Mulroney and Mexican President Carlos Salinas, each responsible for spearheading
and promoting the agreement, ceremonially signed it. The agreement then needed to
be ratified by each nation's legislative or parliamentary branch.
Before the negotiations were finalized, Bill Clinton came into office in the
U.S. and Kim Campbell in Canada, and before the agreement became law, Jean
Chrtien had taken office in Canada.
The proposed Canada-U.S.trade agreement had been extremely controversial
and divisive in Canada, and the 1988 Canadian election was fought almost
exclusively on that issue. In that election more Canadians voted for anti-free trade
parties (the Liberals and the New Democrats) but more seats in parliament were won
by the pro-free trade Progressive Conservatives (PCs). Mulroney and the PCs had
a parliamentary majority and were able to easily pass the Canada-U.S. FTA and
NAFTA bills. However Mulroney himself had become deeply unpopular and resigned
on June 25, 1993. He was replaced as Conservative leader and prime minister by Kim
Campbell, who then led the PC party into the 1993 election where they were
decimated by the Liberals under Jean Chrtien. Chrtien had campaigned on a
promise to renegotiate or abrogate NAFTA, but instead negotiated the two
supplemental agreements with the new U.S. Democratic president, and ideological
ally, Bill Clinton.

FACTS ABOUT NAFTA

1. HISTORY OF NAFTA
NAFTA is short for the North American Free Trade Agreement. NAFTA
covers Canada, the U.S. and Mexico making it the worlds largest free trade area in
terms of GDP. Three U.S. Presidents were involved in creating it over a decade. Find
out how it was created, what its purpose was and how large it is today.
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2. ADVANTAGES OF NAFTA
NAFTA created the worlds largest free trade area, linking 439 million people
and producing $15.3 trillion in goods and services annually. Estimates are that
NAFTA will increase U.S. GDP by between .1% - .5%. Trade between the NAFTA
signatories tripled, from $297 billion in 1993 to $903 billion in 2007. Find out what
industries benefited, and how NAFTA specifically supported this increase in trade.
NAFTA created the worlds largest free trade area, linking 439 million people
and producing $15.3 trillion in goods and services annually. Estimates are that
NAFTA increases U.S. GDP by as much as .5% a year.
That's because its elimination of tariffs and agreements on international rights
for business investors increases trade and capital, spurring business growth.
Elimination of tariffs also reduces inflation, by decreasing costs of imports.

INCREASE IN TRADE:
Trade between the NAFTA signatories tripled, from $297 billion in 1993 to
$903 billion in 2007. Specifically,U.S. goods exports to Canada and Mexico grew
157%, from $142 billion to $364.6 billion.Exports from Canada and Mexico to the
U.S. grew 231%, from $151 billion in to $501 billion.NAFTA provides the ability for
firms in member countries to bid on government contracts. It also protect intellectual
properties.

INCREASE IN U.S. AGRICULTURAL EXPORTS:

NAFTA is especially helpful for agricultural exports because it reduces high
Mexican tariffs. Mexico is the top export destination for beef, rice, soybean meal,
corn sweeteners, apples and beans. It is the second largest for corn, soybeans and oils.
As a result of NAFTA, the percent of U.S. agricultural exports to Canada and Mexico
has grown from 22% in 1993 to 30% in 2007. (Source: USTR, NAFTA Facts, March
2008)
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INCREASE IN TRADE OF SERVICES:

More than 40% of U.S. GDP is services, including financial services and
health care. These aren't as easily transported as are goods, so being able to expand
services to nearby countries is important. Thanks to NAFTA, U.S. services exports to
Canada and Mexico grew 125%, from $25 billion to $62 billion in 2006. Services
exports from Canada and Mexico grew to $37 billion.NAFTA eliminates trade
barriers in nearly all service sectors. Service industries are often highly regulated, and
the regulations aren't always apparent. NAFTA requires authorities to use open
administrative procedures and publish all regulations.

INCREASE IN FOREIGN DIRECT INVESTMENT:

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada
and Mexico tripled to $331 billion (as of 2006, latest data available). Canadian and
Mexican FDI in the U.S. was $165 billion.NAFTA reduces risk for investors by
guaranteeing they will have the same legal rights as local investors. It also guarantees
they will receive fair market value for their investments in case the government
decides to nationalize the industry or take the property by eminent domain. NAFTA
provides a legal mechanism for investors to make claims against a government, if
needed.

3. DISADVANTAGES OF NAFTA
NAFTA has been criticized for both displacing American workers and
decreasing wage levels for those that remain. Mexican workers have also suffered, as
have Mexican farmers and its environment. Find out the facts behind these
accusations, and how NAFTA contributed to these problems. NAFTA has many
disadvantages. NAFTA allowed U.S. manufacturers to move jobs to lower-cost
Mexico. Those manufacturers that remained had to decrease wages to compete.

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Many of Mexico's farmers were put out of business by U.S.-subsidized farm

products. NAFTA provisions for Mexican labor and environmental protection were
not strong enough, allowing for exploitation.
LOSS OF U.S. JOBS:
Since the cost of labor is cheaper in Mexico, many manufacturing industries
moved part of their production from high-cost U.S. states. Between 1994 and 2002,
the U.S. lost 1.7 million jobs, gaining only 794,00, for a net loss of 879,000 jobs.
Most of these jobs(78%) were in manufacturing. States hit hard included California,
New York, Michigan and Texas. These states had high concentrations of the industries
that moved plants to Mexico. These industries included motor vehicles, textiles,
computers, and electrical appliances. (Source: Economic Policy Institute, The High
Cost of Free Trade, November 17, 2003)
LOWER U.S. WAGES:
Employers in industries that could move to Mexico used that as a threat during
union organizing drives, thus suppressing wage growth. Between 1993 and 1995, 50%
of all companies used the threat; by 1999, that rate had grown to 65%.
MEXICO'S FARMERS ARE BEING PUT OUT OF BUSINESS:
Thanks to the 2002 Farm Bill, U.S. agribusiness is heavily subsidized - as
much as 40% of net farm income. As tariffs are removed, corn and other food is
exported to Mexico below cost. This benefits consumers, who pay less for food, but
makes it impossible for rural Mexican farmers to compete. In contrast, between 19902001, Mexico decreased its subsidies to farmers from 33.2% to 13.2% of total farm
income. Most of those subsidies go to Mexico's large farms. (Source: International
Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003; The
Economist, Tariffs and Tortillas, January 24, 2008)

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MAQUILADORA WORKERS ARE EXPLOITED:

NAFTA caused an increase of the maquiladora program, in which U.S. owned
companies employ Mexican workers near the border to cheaply assemble products for
"export" to the U.S. This now comprises 30% of Mexico's labor force. These workers
have "no labor rights or health protections, workdays stretch out 12 hours or more,
and if you are a woman, you could be forced to take a pregnancy test when applying
for a job," according to Continental Social Alliance. (Source: Worldpress.org, Lessons
of NAFTA, April 20, 2001)
DEGRADATION OF MEXICO'S ENVIRONMENT HAS INCREASED:
In response to NAFTA competitive pressure, Mexico agribusiness has
increased its use of fertilizers and other chemicals, costing $36 billion per year in
pollution. Rural farmers have expanded into more marginal land, resulting in
deforestation at a rate of 630,000 hectares per year.

4. U.S. REGIONAL TRADE AGREEMENTS

How does NAFTA fit within the context of other U.S. regional trade
agreements, such as CAFTA, FTAA, and MEFTI?

WHAT ARE EXCHANGE RATES?

The dollar's exchange rate tells you how much a dollar is worth in a foreign
currency, and vice versa. For example, on March 3, 2008, a dollar was worth $.98
Canadian dollars, 7.01 Chinese yuan, and 103.57 Japanese yen. The Euro is normally
quoted in terms of its dollar value, for some reason, so one Euro was worth $1.52.

PROVISIONS
The goal of NAFTA was to eliminate monkeys of trade and investment
between the USA, Canada and Mexico.
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The implementation of NAFTA on January 1, 1994, brought the immediate

elimination of tariffs on more than one half of US imports from Mexico and more
than one third of US exports to Mexico. Within 10 years of the implementation of the
agreement all US-Mexico tariffs would be eliminated except for some US agricultural
exports to Mexico that were to be phased out in 15 years. Most US-Canada trade was
already duty free. NAFTA also seeks to eliminate non-tariff trade barriers.

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NAFTA OR NORTH AMERICAN FREE TRADE

AGREEMENT
NAFTA covers Canada, the U.S. and Mexico making it the world's largest free
trade area. By 2008 almost all tariffs will have been eliminated. From 1993 (the
initiation of NAFTA) to 2005, trade increased from $297 billion to $810 billion.

The North America Free Trade Agreement, also known as NAFTA, is a trade
agreement between the United States, Canada, and Mexico. NAFTA eliminated the
majority of tariffs on products traded among the United States, Canada, and Mexico,
and gradually phased out other tariffs over a 15-year period. The treaty also protects
intellectual property rights (patents, copyrights, and trademarks), and outlines the
removal of investment restrictions among the three countries. There have been
positive and negative outcomes from the NAFTA agreement. Some argue that NAFTA
has been positive for Mexico, which has seen its poverty rates fall and real income
rise, even after accounting for the 19941995 economic crisis. Others argue that
NAFTA has been beneficial to business owners and elites in all three countries, but
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has had negative impacts on farmers in Mexico who saw food prices fall based on
cheap imports from U.S. agribusiness, and negative impacts on US workers in
manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA
has contributed to the rising levels of inequality in both the U.S. and Mexico. Some
economists believe that NAFTA has not been enough to produce an economic
convergence, nor to substantially reduce poverty rates. Some have suggested that in
order to fully benefit from the agreement, Mexico must invest more in education and
promote innovation in infrastructure and agriculture. Overall, NAFTA has not caused
any trade diversion aside from the textiles and apparel industry.

TIMELINE:
1988

: Canada and the US signed the Canada-U.S. Free Trade Agreement.

January 1, 1994: NAFTA was made as an expansion on the earlier USCanada trade agreement.

2001: After the attacks on September 11, the United States signed the Security
and Prosperity Partnership of North America.
2001: Mexicos percentage of exports ousted its percentage of imports.
2006: Foreign officials were admitted into the US because of the NAFTA
agreement.
2006: Canadian Government estimates that 24,830 US citizens and 15,219
Mexican citizens were present in Canada as "foreign workers".

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EFFECTS

NAFTA's effects, both positive and negative, have been quantified by several
economists, whose findings have been reported in publications such as the World
Bank's Lessons from NAFTA for Latin America and the Caribbean NAFTA's Impact
on North America, and NAFTA Revisited by the Institute for International Economics.
Some argue that NAFTA has been positive for Mexico, which has seen
itspoverty rates fall and real income rise (in the form of lower prices, especially food),
even after accounting for the 19941995 economic crisis. Others argue that NAFTA
has been beneficial to business owners and elites in all three countries, but has had
negative impacts on farmers in Mexico who saw food prices fall based on cheap
imports from U.S. agribusiness, and negative impacts on U.S. workers in
manufacturing and assembly industries who lost jobs. Critics also argue that NAFTA
has contributed to the rising levels of inequality in both the U.S. and Mexico. Some
economists believe that NAFTA has not been enough (or worked fast enough) to
produce an economic convergence, nor to substantially reduce poverty rates. Some
have suggested that in order to fully benefit from the agreement, Mexico must invest
more in education and promote innovation in infrastructure and agriculture.

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TRADE

According to Issac (2005), overall, NAFTA has not caused trade diversion,
aside from a few industries such as textiles and apparel, in whichrules of
origin negotiated in the agreement were specifically designed to make U.S. firms
prefer Mexican manufacturers. The World Bank also showed that the combined
percentage growth of NAFTA imports was accompanied by an almost similar increase
of non-NAFTA exports.

INDUSTRY

Maquiladoras (Mexican factories which take in imported raw materials and

produce goods for export) have become the landmark of trade in Mexico. These are
plants that moved to this region from the United States, hence the debate over the loss
of American jobs. Hufbauer's (2005) book shows that income in the maquiladora
sector has increased 15.5% since the implementation of NAFTA in 1994. Other
sectors now benefit from the free trade agreement, and the share of exports from nonborder states has increased in the last five years while the share of exports from
maquiladora-border states has decreased. This has allowed for the rapid growth of
non-border metropolitan areas, such as Toluca, Lenand Puebla; all three larger in
population than Tijuana, Ciudad Jurez, and Reynosa. The main non-maquiladora
industry that has suffered from NAFTA is the automobile industry.
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ENVIRONMENT
Securing U.S. congressional approval for NAFTA would have been impossible
without addressing public concerns about NAFTAs environmental impact. The
Clinton administration negotiated a side agreement on the environment with Canada
and Mexico, the North American Agreement on Environmental Cooperation
(NAAEC), which led to the creation of the Commission for Environmental
Cooperation (CEC) in 1994. To alleviate concerns that NAFTA, the first regional
trade agreement between a developing country and two developed countries, would
have negative environmental impacts, the CEC was given a mandate to conduct
ongoing ex post environmental assessment of NAFTA.
In response to this mandate, the CEC created a framework for conducting
environmental analysis of NAFTA, one of the first ex post frameworks for the
environmental assessment of trade liberalization. The framework was designed to
produce a focused and systematic body of evidence with respect to the initial
hypotheses about NAFTA and the environment, such as the concern that NAFTA
would create a race to the bottom in environmental regulation among the three
countries, or the hope that NAFTA would pressure governments to increase their
environmental protection mechanisms. The CEC has held four symposia using this
framework to evaluate the environmental impacts of NAFTA and has commissioned
47 papers on this subject. In keeping with the CECs overall strategy of transparency
and public involvement, the CEC commissioned these papers from leading
independent experts.
Overall, none of the initial hypotheses was confirmed. NAFTA did not
inherently present a systemic threat to the North American environment, as was
originally feared, but NAFTA-related environmental threats instead occurred in
specific areas where government environmental policy, infrastructure, or mechanisms,
were unprepared for the increasing scale of production under trade liberalization. In
some cases, environmental policy was neglected in the wake of trade liberalization; in
other cases, NAFTA's measures for investment protection, such as Chapter 11, and
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measures against non-tariff trade barriers, threatened to discourage more vigorous

environmental policy.[16] The most serious overall increases in pollution due to
NAFTA were found in the base metals sector, the Mexican petroleum sector, and the
transportation equipment sector in the United States and Mexico, but not in Canada.

AGRICULTURE
From the earliest

negotiation, agriculture was

(and still remains) a

controversial topic within NAFTA, as it has been with almost all free trade
agreements that have been signed within the WTO framework. Agriculture is the only
section that was not negotiated trilaterally; instead, three separate agreements were
signed between each pair of parties. The CanadaU.S. agreement contains significant
restrictions and tariff quotas on agricultural products (mainly sugar, dairy, and poultry
products), whereas the MexicoU.S. pact allows for a wider liberalization within a
framework of phase-out periods (it was the first NorthSouth FTA on agriculture to be
signed).
The overall effect of the MexicoU.S. agricultural agreement is a matter of
dispute. Mexico did not invest in the infrastructure necessary for competition, such as
efficient railroads and highways, creating more difficult living conditions for the
country's poor. Still, the causes of rural poverty cannot be directly attributed to
NAFTA; in fact, Mexico's agricultural exports increased 9.4 percent annually between
1994 and 2001, while imports increased by only 6.9 percent a year during the same
period.
Production of corn in Mexico has increased since NAFTA's implementation.
However, internal corn demand has increased beyond Mexico's sufficiency, and
imports have become necessary, far beyond the quotas Mexico had originally
negotiated. Zahniser & Coyle have also pointed out that corn prices in Mexico,
adjusted for international prices, have drastically decreased, yet through a program of
subsidies expanded by former president Vicente Fox, production has remained stable
since 2000.

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The logical result of a lower commodity price is that more use of it is made
downstream. Unfortunately, many of the same rural people who would have been
likely

to

produce

higher-margin

value-added

products

in

Mexico

have

instead emigrated. The rise in corn prices due to increased ethanol demand may
improve the situation of corn farmers in Mexico.
In a study published in the August 2008 issue of the American Journal of
Agricultural Economics, NAFTA has increased U.S. agricultural exports to Mexico
and Canada even though most of this increase occurred a decade after its ratification.
The study focused on the effects that gradual "phase-in" periods in regional trade
agreements, including NAFTA, have on trade flows. Most of the increase in members
agricultural trade, which was only recently brought under the purview of the World
Trade Organization, was due to very high trade barriers before NAFTA or other
regional trade agreements.

MOBILITY OF PERSONS
According to the Department of Homeland Security Yearbook of Immigration
Statistics, during fiscal year 2006 (i.e., October 2005 through September 2006),
74,098 foreign professionals (64,633 Canadians and 9,247 Mexicans) were admitted
into the United States for temporary employment under NAFTA (i.e., in the TN
status). Additionally, 17,321 of their family members (13,136 Canadians, 2,904
Mexicans, as well as a number of third-country nationals married to Canadians and
Mexicans) entered the U.S. in the treaty national's dependent (TD) status. [22]Because
DHS counts the number of the new I-94 arrival records filled at the border, and the
TN-1 admission is valid for one year, the number of non-immigrants in TN status
present in the U.S. at the end of the fiscal year is approximately equal to the number
of admissions during the year. (A discrepancy may be caused by some TN entrants
leaving the country or changing status before their one-year admission period expired,
while other immigrants admitted earlier may change their status to TN or TD, or
extend earlier granted TN status).

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Canadian authorities estimated that, as of December 1, 2006, the total of

24,830 U.S. citizens and 15,219 Mexican citizens were present in Canada as "foreign
workers". These numbers include both entrants under the NAFTA agreement and
those who have entered under other provisions of the Canadian immigration law. New
entries of foreign workers in 2006 were 16,841 (U.S. citizens) and 13,933 (Mexicans).

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CRITICISM AND CONTROVERSIES

CANADIAN DISPUTES
There is much concern in Canada over the provision that if something is sold
even once as a commodity, the government cannot stop its sale in the future. [25] This
applies to the water from Canada's lakes and rivers, fueling fears over the possible
destruction of Canadian ecosystems and water supply.
In 1999, Sun Belt Water Inc., a company out of Santa Barbara, California,
filed an Arbitration Claim under Chapter 11 of the NAFTA claiming $105 million as a
result of Canada's prohibition on the export of bulk water by marine tanker, a move
that destroyed the Sun Belt business venture. Sun Belt maintains a website where
many documents concerning the Arbitration are posted www.sunbeltwater.com. The
claim sent shock waves through Canadian governments that scrambled to update
water legislation and remains unresolved.
Other fears come from the effects NAFTA has had on Canadian lawmaking. In
1996, the gasoline additiveMMT was brought into Canada by an American company.
At the time, the Canadian federal government banned the importation of the additive.
The American company brought a claim under NAFTA Chapter 11 seeking US$201
million, and by Canadian provinces under the Agreement on Internal Trade ("AIT").
The American company argued that their additive had not been conclusively linked to
any health dangers, and that the prohibition was damaging to their company.
Following a finding that the ban was a violation of the AIT, the Canadian federal
government repealed the ban and settled with the American company for US$13
million. Studies by Health and Welfare Canada (now Health Canada) on the health
effects of MMT in fuel found no significant health effects associated with exposure to
these exhaust emissions. Other Canadian researchers and the U.S. Environmental
Protection Agency disagree with Health Canada, and cite studies that include possible
nerve damage.

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The United States and Canada had been arguing for years over the United
States' decision to impose a 27 percent duty on Canadian softwood lumber imports,
until new Canadian Prime Minister Stephen Harpercompromised with the United
States and reached a settlement on July 1, 2006. The settlement has not yet been
ratified by either country, in part due to domestic opposition in Canada.
Canada had filed numerous motions to have the duty eliminated and the
collected duties returned to Canada. After the United States lost an appeal from a
NAFTA panel, it responded by saying "We are, of course, disappointed with the
[NAFTA

panel's]

decision,

but

it

will

have

no

impact

on

the anti-

dumping andcountervailing duty orders." (Nick Lifton, spokesman for U.S. Trade
Representative Rob Portman) On July 21, 2006, the U.S. Court of International
Trade found that imposition of the duties was contrary to U.S. law.

CANADIAN GOVERNMENT CHALLENGED ON CHANGE IN

INCOME TRUST TAXATION
On October 30, 2007, American citizens Marvin and Elaine Gottlieb filed a
Notice of Intent to Submit a Claim to Arbitration under NAFTA. The couple claims
thousands of U.S. investors lost a total of $5 billion dollars in the fall-out from
the Conservative Government's decision the previous year to change the tax rate on
income trusts in the energy sector. On 29 April 2009, a determination was made that
this change in tax law was not expropriation.

U.S. DEINDUSTRIALIZATION
An increase in domestic manufacturing output and a proportionally greater
domestic investment in manufacturing does not necessarily mean an increase in
domestic manufacturing jobs; this increase may simply reflect greater automation and
higher productivity. Although the U.S. total civilian employment may have grown by
almost 15 million in between 1993 and 2001, manufacturing jobs only increased by
476,000 in the same time period.

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Furthermore from 1994 to 2007, net manufacturing employment has declined

by 3,654,000, and during this period several other free trade agreements have been
concluded or expanded.

IMPACT ON MEXICAN FARMERS

CRITICS OF NAFTA CITE NEGATIVE AFFECTS ON MEXICO'S

CORN FARMERS
In 2000, U.S. government subsidies to the corn sector totaled $10.1 billion, a
figure ten times greater than the total Mexican agricultural budget that year.These
subsidies have lead to charges of de factodumping which jeopardizes Mexican farms
and the country's food self-sufficiency.
Other studies reject NAFTA as the force responsible for depressing the
incomes of poor corn farmers, citing the trend's existence more than a decade before
NAFTA's existence, an increase in maize production after NAFTA went into effect in
1994, and the lack of a measurable impact on the price of Mexican corn due to
subsidized corn coming into Mexico from the United States, though they agree that
the abolition of U.S. agricultural subsidies would benefit Mexican farmers.
According to Graham Purchase in Anarchism and Environmental Survival,
NAFTA could cause "the destruction of the ejidos (peasant cooperative village
holdings) by corporate interests, and threatens to completely reverse the gains made
by rural peoples in the Mexican Revolution."

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CERTIFICATE OF ORIGIN OF NAFTA

Canada, Mexico and the United States established a uniform Certificate of Origin to
certify that goods imported into their territories qualify for the preferential tariff
treatment accorded by the NAFTA. Only importers who possess a valid Certificate of
Origin may claim preferential tariff treatment for originating goods.
LANGUAGE
A uniform Certificate of Origin is used in all three countries and is printed in English,
French or Spanish. The Certificate shall be completed in the language of the country
of export or the language of the importing country, at the exporter's discretion.
Importers shall submit a translation of the Certificate to their own customs
administration when requested.
SCOPE
A Certificate of Origin may cover a single importation of goods or multiple
importations of identical goods. Certificates that cover multiple shipments are called
blanket certificates and may apply to goods imported within any twelve-month period
specified on the Certificate. Although a Certificate of Origin may cover goods
imported over not more than a twelve-month period, it remains valid for NAFTA
preference claims made up to four years from the date upon which it was signed.

A machine made in Canada qualifies for NAFTA tariff treatment and is exported with
a Certificate of Origin signed on January 1, 1995. The U.S. importer does not enter the
machine for consumption but instead places it in a customs bonded warehouse. He
overlooks the Certificate of Origin and fails to claim NAFTA treatment for the
machine upon entry into the warehouse. If the U.S. importer withdraws the machine
from the warehouse for consumption on January 17, 1999, he will be barred from
claiming NAFTA treatment upon withdrawal because the Certificate is over four years
old and is no longer valid.

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COMPLETION OF CERTIFICATE
The Certificate of Origin must be completed and signed by the exporter of the
goods. Where the exporter is not the producer, the exporter may complete the
Certificate on the basis of:

knowledge that the good originates;

reasonable reliance on the producer's written representation that the good

originates; or

a completed and signed Certificate of Origin for the good voluntarily provided
to the exporter by the producer.

IMPORTERS' OBLIGATIONS
Importers claiming NAFTA preferential tariff treatment shall make a
declaration, based on a valid Certificate of Origin in their possession, on the import
documentation. Where no claim for preferential tariff treatment is made at the time of
importation, importers may request preferential tariff treatment no later than one year
after the date on which the good was imported, provided a Certificate of Origin for the
goods is obtained.
Importers must provide the Certificate to the importing country's customs
administration upon request, and must submit a corrected declaration and pay the
corresponding duties whenever there is reason to believe that the Certificate contained
inaccurate information.
The customs administration of the importing country may deny preferential
tariff treatment to the goods if the importer fails to comply with any of the customs
procedures set out in Chapter Five of the NAFTA.
Importers must maintain records pertaining to the importation for five years or such
longer period as may be specified by their country.

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EXPORTERS' AND PRODUCERS' OBLIGATIONS

Exporters or producers that prepare Certificates of Origin shall provide copies
to their own customs administration upon request.
Exporters or producers that provide a Certificate of Origin must maintain records
pertaining to the exportation for five years or such longer period as may be specified
by their countries.
Exporters or producers that complete a Certificate of Origin shall notify all
parties to whom the Certificate was given of any change that could affect its accuracy
or validity.

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DIAGRAMATIC RECORDS
NAFTA 2001
The most significant thing about this
2000 chart is that fact that despite lots
of encouragement from federal and
provincial governments for Canadian
exporters to seek out markets in Asia,
Europe and Latin America - we still
do more than 87% of our business
with the U.S.
Mexico

highly

touted

as

an

opportunity for us in 2001 and

beyond, is the tiny slice of green in
the chart to the left.
NAFTA 2006
In the later years of the 1990's it appeared
that NAFTA was responsible for Canada
doing more and more trade with the U.S. and therefore increasing our vulnerability
to swings in the U.S. economy and
reducing our business with the ROW (rest
of the world).
However, as the U.S. economy began to
slow

in

the

"Bush"

administration,

Canadian companies have sought more

business with the rest of the world, which
is reflected in an updated chart showing
Canadian exports to the U.S.

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How
NAFTA
was

in

1996?

.
How
NAFTA
was

in

2006?

since 2001, we have done much better diversifying away from exporting mostly
to the U.S. and are improving our exports to Asia-Pacific and Europe

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U.S. NAFTA TRADE DEFICIT SURGING IN 2003

U.S. NAFTA trade deficit surging in 2003. Since the U.S. entered into the
North American Free Trade Agreement (NAFTA) with Mexico and Canada, the trade
deficit with these countries has grown rapidly (see chart below). U.S. firms moved
plants to Mexico and Canada to take advantage of lower wages and new rules
providing unheard of levels of protection for foreign investors. The combined U.S.
trade balance with the other two NAFTA countries (the difference between U.S.
exports and imports) was a small, stable deficit prior to NAFTA. Since NAFTA that
combined deficit has grown rapidly. U.S. imports have been growing more rapidly
than exports, so the trade deficit has expanded. When the growth of this deficit eased
in 2002, some claimed that U.S. trade with China and other lower-wage countries was
displacing NAFTA trade. Contrary to this view, the U.S. NAFTA deficit has increased
12.2% so far this year, evidence that deficits with Mexico and Canada are a
continuing drag on U.S. growth and job creation.

Exports, which expand domestic production, increase the number of U.S.

industrial jobs, while imports, which replace goods that could have been produced in
the United States, eliminate jobs.
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The rise in the U.S. deficit with Canada and Mexico from 1993 to 2000
displaced production supported by 766,000 U.S. jobs. Most of those jobs would have
been high-wage positions in manufacturing industries. The sustained growth of this
deficit suggests that NAFTA continues to eliminate more jobs in the United States,
which worsens the current economic downturn.
Further study of NAFTA by researchers in Canada and Mexico has shown that
workers in all three countries have been hurt, but for different reasons. In Mexico, real
wages have fallen sharply and there has been a sharp drop in the number of people
holding regular jobs in paid positions.
Many workers have been shifted into subsistence-level work in the "informal
sector," frequently unpaid work in family retail trade or restaurant businesses. In
Canada, a decade of heightened competition with the U.S. is eroding social
investment in public spending on education, health care, unemployment
compensation, and a wide range of other public services. This experience suggests
that workers have good reasons to be concerned as we enter NAFTA's second decade.

WHAT IS BARACK OBAMA'S POSITION ON FREE TRADE?

Overall, Obama opposes many current trade agreements, which he says are bad for
the economy because they provide perks for businesses but don't protect workers.

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OBAMA HAS THREE MAIN PROPOSALS:

1. Amend NAFTA - He would re-open NAFTA to beef up protection for labor
and the environment.
2. Fight for Fair Trade - He opposes pending Free Trade Agreements (FTA's)
with Colombia because it allows violence against labor leaders and South
Korea because it restricts U.S. auto imports. He also wants to pressure the
World Trade Organization to enforce current agreements and stop unfair
subsidies.
3. Improve Transition Assistance - He supports Federal funding for retraining
displace U.S. workers.

HOW WOULD OBAMA'S FREE TRADE POSITION IMPACT

THE ECONOMY?
Putting more job protection for U.S. workers in NAFTA and other FTA's may
not help American workers because it doesn't get at the source. Job outsourcing is a
result of declining U.S. competitiveness, which is itself a result of decades of the U.S.
not investing in education. This is particularly true for high tech, engineering, and
science.
Opposing FTA's for two of America's closest allies, Colombia and South
Korea, may damage our relationship with them while hurting the U.S. economy. In
fact, Colombia's homicide rate against union members, and the public as a whole, has
dropped 40% since 2002 thanks to a government protection program.
Rejection of the South Korean FTA could cause newly-elected South Korean
President Lee Myung-bak to further lose support among a population who are already
upset that he agreed to allow U.S. beef to be imported as part of the agreement. South
Koreans remember the cases of mad cow disease found in U.S. beef four years ago.

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The agreement actually levels the playing field for the auto industry. Current South
Korean tariffs of 8% would be removed, as would current U.S. tariffs, which are
lower at 3.5%.
NAFTA's open new markets for businesses by removing trade barriers. For
example, NAFTA increased trade from $297 billion to $810 billion. The Peterson
Institute for International Economics estimates that ending all trade barriers would
increase U.S. income by $500 billion.
Opening NAFTA to renegotiation would allow Mexico to address it
complaints, including immigration reform, U.S. farm subsidies and an unfulfilled
NAFTA promise to allow Mexican commercial trucks further into the U.S.
Free trade creates more jobs than it outsources. For example, the formation of
the European Union free trade area created 300,000900,000 net new jobs. In the U.S,
1.3 million export-related jobs were created between 1994 and 1998.
Increasing U.S. protectionism will further slow economic growth and cause
more layoffs, not less. If the U.S. regresses and closes its borders, other countries will
do the same. This could cause layoffs among the 12 million U.S. workers who owe
their jobs to exports.

WHAT FREE TRADE ISSUES IS OBAMA MISSING?

One of the key obstacles to the Doha round of the World Trade Organization
agreement was U.S. agricultural subsidies. Developing countries are afraid of lowcost, subsidized U.S. farm products flooding their markets, essentially putting family
farmers out of business. Until the U.S. significantly reduces these subsidies, further
progress on this multi-lateral trade agreement is effectively dead in its tracks.
Contrary to popular opinion, agricultural subsidies no longer go to U.S. family
farms. Instead, tax programs that were designed to help Depression-era families keep
their farms are now effectively subsidizing huge corporations who have, in turn, put
these family farms out of business.
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In fact, Obama's renewed pressure on the WTO to enforce other countries'

subsidies could then bring into question the subject of U.S. agricultural subsidies still a sore point in the international trade community. The failure of the Doha round
has led to a fresh wave of bilateral trade agreements between China, the Middle East,
Latin America and Africa. Further U.S. protectionism at this time will only increase
this activity, thus pushing the U.S. economy further out of the trade loop, and further
into economic decline.

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BIBLIOGRAPHY

- www.google.com

-www.wikipedia.org

-www.yahoo.com

NAFTAs OFFICIAL SITE

NAFTAS HITORY

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