The North American Free Trade Agreement (NAFTA) has been designed to remove most of the barriers to trade and investment among the United States, Mexico and Canada. On 1st January 1994 the implementation of NAFTA commenced.
NAFTA has two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).
The NAAEC set up the North American Development Bank (NADBank) for funding pollution reduction projects. The NADBank has assisted 36 environmental projects in Mexico, mostly in the water sector.
Agriculture has been a bone of contention in the NAFTA agreements, like in virtually all other free trade agreements. So, instead of tripartite negotiations for the agricultural sector under the NAFTA, there were three separate bilateral agreements by and between each pair of parties.
Under the NAFTA, all tariffs on agricultural trade between the United States and Canada were eliminated, barring a few exceptions, by the time line of 1st January 1998.
Moreover, under the provisions of the NAFTA all non tariff barriers to agricultural trade between the United States and Mexico were removed. In addition, many tariffs were taken off immediately with the commencement of the NAFTA accord in 1994. Other custom duties were gradually phased out over time lines of 5 to 15 years. This arrangement facilitated an orderly transition to free trade between these two trading partners, with full fledged dismantling of tariff walls beginning on 1st January 2008.
On the issue of market access for agricultural products, Mexico and Canada executed separate bilateral NAFTA agreements. The Mexican-Canadian agreement either removed most tariffs immediately or in phases over periods of 5, 10 or 15 years. However, customs duties continue on dairy, poultry, eggs and sugar in bilateral trade between these countries.
NAFTA has appreciably stimulated trade and investment flows into North America. According to statistics of the International Monetary Fund, aggregate trade among the three NAFTA countries has doubled from US$306 billion in 1993 to almost US$621 billion in 2002. It is a glowing testimony to the proposition that outward looking countries can enhance their wealth and competitiveness through polices of trade liberalization. For instance, in the wake of NAFTA, Mexico has witnessed its real income rise, mainly in the form of lower food prices, and seen poverty rates fall. Particularly, NAFTA has been beneficial to the business owners of all the three participating countries.
However, NAFTA has come in under a lot of criticism on the ground that it has increased income inequality in the member countries and its benefits have been largely confined to the affluent sections of the society. For example, Mexican farmers were hit since food prices dipped due to cheap imports from American agribusiness. Even many American factory workers had lost their jobs.
Nevertheless, NAFTA is a big first step in North American integration process. NAFTA represents a blending of different national legal and business cultures and heritage. NAFTA law has considerably influenced a host of other free trade agreements in the region, such as Canada- Chile, Canada- Cost Rica, US- Chile and several Mexico-Latin American agreements. NAFTA rules provide guidelines or framework for the ongoing negotiations for a Free Trade Area of the Americas (FTAA).
(More :http://www.nafta-sec-alena.org
http://www.fas.usda.gov/itp/Policy/nafta/nafta.asp
http://www.ustr.gov/Trade_Agreements/Regional/NAFTA/Section_Index.html)
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