North American Free Trade Agreement – Definition

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North American Free Trade Agreement (NAFTA) Definition

The North American Free Trade Agreement (NAFTA) was signed by Mexico, Canada and the United States in 1993 but it came into force on January 1, 1994. This trade agreement was signed to eliminate trade barriers on products (textiles, automobiles, agriculture and many others) traded between these countries. The major aim of this trade agreement is to foster economic activities among these three countries.

However, on August 2018, the president of the United States, President Trump announced a replacement for NAFTA and other trade agreement that unfair to the U.S.The governments of the United States, Mexico and Canada agreed to replace NAFTA with the United States Mexico Canada Agreement (USMCA) on September 30th 2018. This trade agreement is expected to create robust economy, employment opportunities and freer markets for these countries.

A Little More on What is the North American Free Trade Agreement

In 1993, President Clinton led administration signed the North American Free Trade Agreement (NAFTA) into law. NAFTA was signed with the aim of fostering to economic activity and growth between the three major economies that signed it. Canada and Mexico are the United States’ second and third-largest suppliers of imported goods, the products they supply include automobiles, machinery, textiles, agricultural products among others.

This trade agreement also eliminated trade tariffs on products traded among these countries so as to stimulate economic growth. When it was signed by the U.S in 1993, president Clinton believed that about 200,000 jobs would be created within two years.

Additions to NAFTA

Two other regulations augmented the provisions contained in the North American Free Trade Agreement (NAFTA) agreement. They are North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).

NAAEC and NAALC are regarded as side agreements that were enforced to supplement NAFTA. Both agreements provide regulations guiding the relocation of businesses to other countries. They prevent businesses that relocate to other countries because of loose regulations that exist in the countries and lower wages. NAFTA also contains regulations and requirements on international trade between the participating countries and penalties for violation of the regulations.

North American Industry Classification System

In order to appropriately classify business establishments and draw a comparison of business activities across North America, a new business-classification system was developed. The North American Industry Classification System (NAICS) have three signatories, this business-classification system aid the classification of industries or businesses with regard to their peculiar production processes.

NAICS is a new classification system that replaced the U.S. Standard Industrial Classification system. NAICS is however designed to be reviewed at a period of five years so that it can be continually relevant. The Instituto Nacional de Estadistica y Geografia in Mexico, Statistics Canada and the United States Office of Management and Budget are the three signatories to NAICS, they are also responsible for its maintenance.

The Impact of NAFTA

NAFTA has a number of significant impacts on the countries that signed it, these impacts are largely positive. However, some experts are at divergence on how NAFTA has contributed to economic growth and higher wages that these countries experience. It is therefore difficult to weigh the impacts of NAFTA due to certain factors involved.

For instance, many businesses were allowed to relocate to countries or regions with lower labor costs despite the existence of supplementary trade agreements like NAALC and NAAEC. This relocation affected many employees, especially in the United States. This is one of the reasons that a motion was moved for the replacement of NAFTA by USMCA to put an end to the concerns of NAFTA.

Reference for North American Free Trade Agreement (NAFTA)

Academic Research on North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA), Villareal, M., & Fergusson, I. F. (2017).

Shedding light on Article 1110 of the North American Free Trade Agreement (NAFTA) concerning expropriations: An environmental case study, Gudofsky, J. L. (2000). Nw. J. Int’l L. & Bus., 21, 243.

The North American Free Trade Agreement (NAFTA) and Mexican nursing, Squires, A. (2010). Health policy and planning, 26(2), 124-132.

The North American Free Trade Agreement (NAFTA): Good for Jobs, for the Environment, and for American, Schoenbaum, T. J. (1993). Ga. J. Int’l & Comp. L., 23, 461.

The greening of free trade? The debate about the North American Free Trade Agreement (NAFTA) and the environment, Benton, L. M. (1996).

The impact of the North American Free Trade Agreement (NAFTA) on rural children and families in Mexico: Transnational policy and practice implications, McCarty, D. (2008). Journal of Public Child Welfare, 1(4), 105-123.

The North American Free Trade Agreement (NAFTA) and Process Patent Protection, Wright, A. (1993).  Am. UL Rev., 43, 603.

Food safety challenges within North American free trade agreement (NAFTA) partners, Holley, R. A. (2011). Comprehensive Reviews in Food Science and Food Safety, 10(2), 131-142.

The Mexican audiovisual space & the North American Free Trade Agreement (NAFTA), Ruiz, E. E. S. (1994). Media Information Australia, 71(1), 70-77.

Managing Regional Collaboration in Higher Education: The Case of the North American Free Trade Agreement (NAFTA)., Crespo, M. (2000). Higher Education Management, 12(1), 23-39.

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