NAFTA Case Study

 North American Free Trade Agreement
• The NAFTA is an agreement signed by the United States, Canada, and Mexico, creating a trilateral trade bloc in North America.
• A trade bloc is an agreement between states, regions, or countries, to reduce barriers to trade between the participating regions.
• The NAFTA came into force on January 1st, 1994.
• As of 2007 the trade bloc is the largest in the world in terms of combined purchasing power parity GDP of its members.
• It is the second largest trade bloc by nominal GDP comparison.
• The agreement opened for door for open trade, meaning tariffs ended on various goods and services
• It implemented equality between Canada, USA and Mexico.
• It has allowed agricultural goods like eggs, corn and meats to be tariff free.
• This has allowed corporations to trade freely, and import and export various goods on a North American Scale.
• In 2010 the United States received about a quarter of its imports from Canada and Mexico, which are its second and third largest suppliers of imported goods.

Advantages:
 • Decreased Tariffs
 • All 3 countries experienced real wage increases
 - NAFTA increased wages in the U.S. by 0.17%, in Canada by 0.96% and in Mexico by 1.3%.
 • Increased trade between the 3 countries
 - Trade of goods and services between the U.S., Canada and Mexico has increased from $337 billion in 1993, before NAFTA went into effect, to $1.182 trillion in 2011.
 • Created jobs for US workers
 - According to the U.S. Chamber of Commerce, increased trade from NAFTA supports about 5 million U.S. jobs.

Disadvantages:
 • Mexican workers have benefitted less than expected
 - Much of the investment has been in the form of factories near the border that are called maquiladoras, where Mexican workers provide cheap labour to produce U.S. goods. This arrangement has fallen short in its goal of increasing the size of Mexico's middle class because Asian labour has proven to be cheaper, and maquiladora towns have a poor quality of life for workers.
 • Lifted tariffs but not regulations
  - NAFTA may have eliminated tariffs between the U.S., Canada and Mexico, but it didn't do away with the numerous customs regulation that can stifle trade. Rule of origin regulations decide whether a good qualifies for trade under NAFTA guidelines, and exporters must complete certificate of origin paperwork