NAFTA Final

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North American Free Trade Agreement OBJECTIVE The objectives of this Agreement are to: establish a free trade area in accordance with this Agreement; promote regional integration through an instrument that contributes to the establishment of the Free Trade Area of the Americas (FTAA) and to the progressive elimination of barriers to trade and investment; create opportunities for economic development; eliminate barriers to trade in, and facilitate the cross-border movement of goods between the territories of the Parties; increase substantially investment opportunities in the territories of the Parties; facilitate trade in services and investment with a view to developing and deepening the Parties' relations under this Agreement; promote conditions of fair competition in the free trade area; establish a framework for further bilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement; and create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes. The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 and in accordance with applicable rules of international law. 1 | Page

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Transcript of NAFTA Final

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North American Free Trade Agreement 

OBJECTIVE

The objectives of this Agreement are to:

establish a free trade area in accordance with this Agreement;

promote regional integration through an instrument that contributes to the establishment of the

Free Trade Area of the Americas (FTAA) and to the progressive elimination of barriers to trade

and investment;

create opportunities for economic development;

eliminate barriers to trade in, and facilitate the cross-border movement of goods between the

territories of the Parties;

increase substantially investment opportunities in the territories of the Parties;

facilitate trade in services and investment with a view to developing and deepening the Parties'

relations under this Agreement;

promote conditions of fair competition in the free trade area;

establish a framework for further bilateral, regional and multilateral cooperation to expand and

enhance the benefits of this Agreement; and

create effective procedures for the implementation and application of this Agreement, for its joint

administration and for the resolution of disputes.

The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives

set out in paragraph 1 and in accordance with applicable rules of international law.

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INTRODUCTION

NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S.

and Mexico making it the world’s 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, and Mexico 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 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?

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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)

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.

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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.

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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.

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 Chrétien 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 Chrétien. Chrétien 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.

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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 world’s 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.

2. Advantages of NAFTA

NAFTA created the world’s 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 world’s 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.

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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)

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.

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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.

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 1990-2001, 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)

Maquiladora Workers Are Exploited:

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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?

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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. 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 1994–1995 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 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.

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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 1994–1995 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 non-border 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, Leónand Puebla; all three larger in population

than Tijuana, Ciudad Juárez, 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 NAFTA’s 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 CEC’s 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 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.

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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 Canada–U.S. agreement

contains significant restrictions and tariff quotas on agricultural products (mainly sugar, dairy,

and poultry products), whereas the Mexico–U.S. pact allows for a wider liberalization within a

framework of phase-out periods (it was the first North–South FTA on agriculture to be signed).

The overall effect of the Mexico–U.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.

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.

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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).

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.

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

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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. 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.

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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.

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.

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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

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States, eliminate jobs. 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.

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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.

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.

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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.

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 300,000–900,000 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.

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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 low-cost, 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.

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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Conclusion

 The North American Free Trade Agreement (NAFTA) will not be fully implemented. However, it is evident that NAFTA has already proved its worth to the United States by playing an important and vital role in increasing consumer choice, improving market access for U.S. products, and expanding U.S. jobs supported by exports.

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Bibliography

- www.google.com

-www.wikipedia.org

-www.yahoo.com

NAFTA’s OFFICIAL SITE

NAFTA’S HITORY

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