A Brief History
On November 17, 1993, the United States House of Representatives passed a resolution establishing the North American Free Trade Agreement, normally referred to as NAFTA, a trade treaty between the United States, Canada, and Mexico that has generated bitter political debate ever since. The agreement became effective as of January 1, 1994.
The trade treaty replaced a previous trade agreement between the US and Canada called the Canada-United States Free Trade Agreement (effective January 1, 1988), and serves to reduce or eliminate barriers to trade between the US and its neighbors, creating a free trade bloc in North America similar to the European Union on the other side of the Atlantic. NAFTA has subsidiary agreements addressing the environment and labor relations among the signatory countries.
Although the measure was passed under Democratic President Bill Clinton, the House vote of 234 for and 200 against consisted of 132 Republicans in support and only 102 Democrats, making the agreement one more strongly Republican than Democrat. The Senate passed NAFTA with 34 Republican votes and 27 Democratic votes, mirroring Republican support of the House of Representatives. In spite of the true nature of the origins of the agreement, Republicans have frequently bashed the pact for political advantage, claiming the agreement has cost American jobs and resulted in US manufacturers moving to Canada and Mexico.
The reality of the ramifications of the NAFTA agreement are overwhelmingly (95% of economists) agreed upon by economists as having been positive for the US economy and the US work force, although certain specific workers and industries have been adversely affected. The overall benefit to the US and its labor force is such that pulling out of the agreement is believed by a large majority of economists and trade experts to be a bad move, something that would definitely hurt the US consumers and workers.
The main basis of NAFTA is the elimination of tariffs on goods exported between member countries. The US and Canada had already minimal tariffs, while the tariffs between the US and Mexico are gradually being eliminated over the years through provisions of NAFTA, with a few minor exceptions. Commerce across borders is also addressed, with freer movement of truck, train, and pipeline commodities across borders without undue delays and tariffs.
Despite threats to pull the United States out of the NAFTA pact, President Trump has not yet made any moves in that direction. Nor has he made any attempts to “renegotiate” NAFTA as promised during the Presidential campaign of 2016. Only time will tell if President Trump or the legislative bodies make any moves toward eliminating or modifying the agreement.
Question for students (and subscribers): What do you think of NAFTA? Do you have any insight to share with us? Feel free to comment on this trade pact in the comments section below this article.
Your readership is much appreciated!
For more information, please see…
Boskin, Michael J., ed. NAFTA at 20: The North American Free Trade Agreement’s Achievements and Challenges. Hoover Institution Press, 2014.