North American Free Trade Agreement (NAFTA)


NAFTA created the largest free trade area and richest market in the world. The NAFTA is the most comprehensive regional trade agreement ever negotiated by the United States and is scheduled to be fully implemented by the year 2008.


NAFTA created the largest free trade area and richest market in the world. The NAFTA is the most comprehensive regional trade agreement ever negotiated by the United States and is scheduled to be fully implemented by the year 2008.

North American Free Trade Agreement (NAFTA): In January 1994, the United States, Mexico and Canada entered into the North American Free Trade Agreement (NAFTA), NAFTA created the largest free trade area and richest market in the world.

NAFTA created the largest free trade area and richest market in the world. The NAFTA is the most comprehensive regional trade agreement ever negotiated by the United States and is scheduled to be fully implemented by the year 2008.

In 1996, U.S. two-way trade in goods under the NAFTA with Canada and Mexico increased the economy @ 44% NAFTA eliminated most tariffs and other trade barriers on products and services passing between the United States, Canada, and Mexico. The pact effectively created a free-trade block among the three largest countries of North America. NAFTA went into effect in 1994 and remained in force until it was replaced in 2020.

NAFTA’s purpose was to encourage economic activity among North America’s three major economic powers: Canada, the U.S., and Mexico. Proponents of the agreement believed that it would benefit the three nations involved by promoting freer trade and lower tariffs among Canada, Mexico, and the United States.

NAFTA aimed to create a free trade zone between the U.S., Canada, and Mexico. The goal was to make doing business in Mexico and Canada less expensive for U.S. companies (and vice versa), reducing the red tape needed to import or export goods.

Provisions: NAFTA’s main provisions were-

1)Gradual reduction of tariffs ,customs duties, and other trade barriers between the three members,

2) Some tariffs were removed immediately and others over periods of as long as 15 years.

3)The agreement ensured eventual duty-free access for a vast range of manufactured goods and commodities traded between the signatories.

4)“National goods” status was provided to products imported from other NAFTA countries, banning any state, local, or provincial government from imposing taxes or tariffs on such goods

.5) To securing intellectual-property rights.

6) To make formal rules for resolving disputes between investors and participating countries.

7)To sue for compensation to corporations or individual investors incase of any signatory country that violated the rules of the treaty.

8) To create potential labor market

9) To make rules forenvironmentalcooperation.

10)To give U.S. and Canadian companies greater access to Mexican markets especially in banking, insurance, advertising telecommunications, and trucking.

Expansion ofThe Agreement:

Although NAFTA failed to deliver all that its proponents had promised, it continued to remain in effect. Indeed, in 2004 the Central America Free Trade Agreement(CAFTA) expanded NAFTA to include five Central American countries (El Salvador, Guatemala, Honduras, Costa Rica, and Nicaragua). In the same year, the Dominican Republic joined the group by signing a free trade agreement with the United States, followed by Colombia in 2006,Peruin 2007, and Panama in 2011. The Trans-Pacific Partnership(TPP) that was signed on October5, 2015,constitutedan expansion of NAFTA on a much-larger scale.


U.S. President Donald Trump came into office in January 2017 determined to scrap U.S. involvement in the TPP and to renegotiate NAFTA, which he frequently characterized as the worst trade deal ever made. Therefore, he ordered for pulling the United States out of the TPP. Donald Trump also threatened to remove the United States if the agreement is not renegotiated to his liking. Out of negotiations he promises to bring back more manufacturing jobs to the United States. Representatives from Canada, Mexico, and the United States began renegotiating the agreement in August 2017.

However, At the end of August 2018Mexico and the United States announced that they had come to terms on a new trade agreement that preserved much of NAFTA but introduced a number of significant changes. Under the pressure Canada, on September 30,also agreed to join the new trade accord, which was branded the United States–Mexico–Canada Agreement(USMCA). The pact was signed between three countries on November 30, 2018. Free trade, also called laissez-faire, a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports). A free-trade policy does not necessarily imply, however, that a country abandons all control and taxation of imports and exports.

Objectives of NAFTA:

The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency are

i) To eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties;

ii) To promote conditions of fair competition in the free trade area; increase substantially investment opportunities in their territories;

iii)To provide adequate and effective protection and enforcement of intellectual property rights in each Party’s territory;

iv) To create effective procedures for the implementation and application of this Agreement, and for its joint administration and the resolution of disputes; and establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

Activities of NAFTA:

(1)To reduce barriers to trade

2) To increase cooperation for improving working conditions in North America

3) To create an expanded and safe market for goods and services produced in North America

4) To establish clear and mutually advantageous trade rules, to help develop and expand world trade and provide a catalyst to broader international cooperation

Contribution of NAFTA:

The North American Free Trade Agreement (NAFTA) will not be fully implemented until 2008.

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.

NAFTA also contribute in agricultural trade, automotive industry, and textile and apparel.

The USMCA is a mutually beneficial win for North American workers, farmers, ranchers, and businesses. The Agreement is creating more balanced, reciprocal trade supporting high-paying jobs for Americans and grow the North American economy. The new United States-Mexico-Canada Agreement (USMCA) will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the North American economies. Under USMCA, we have created new rules to help our farmers, ranchers and workers better face the challenges of the 21st century economy.




The United States-Mexico-Canada Agreement, also known as the USMCA, is a trade deal between the three nations which was signed on November30, 2018. The USMC Are places the North American Free Trade Agreement (NAFTA), which had been in effect since January of 1994.“USMCAwill give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade, and robust economic growth in our region. It will strengthen the middle class and create good ,well-paying jobs and new opportunities for the nearly half billion people who call North America home.”

Leave a Reply

Your email address will not be published. Required fields are marked *