North American Free Trade Agreement NAFTA North American Free Trade Agreement

NAFTA: implemented on January 1, 1994 Removed most barriers to trade and investment between Canada, U.S., and Mexico

Tariffs and Quotas Tariff: A tax countries put on imported goods to make sure their goods can compete. Quota: A proportional share, as of goods, assigned to a group or to each member of a group. Currently Canadian and U.S. agricultural import tariffs are at zero except for Canadian poultry and U.S. sugar.  As of January 1, 2003, Mexican import tariffs are at zero except for corn, dry beans, non-fat dried milk, orange juice and sugar, all of which are subject to tariff-rate quotas.

NAFTA Advantages: Agricultural trade between the U.S. and Mexico increased 149% since 1993, reaching $15.8 billion in 2004.   Agricultural trade between the U.S. and Canada increased 112% since 1993 In 2004, exports of numerous key U.S. commodities set records to both countries: Canada:  vegetables, fruits, snack foods, poultry, pet foods, vegetable oils, planting seeds, breakfast cereals, tree nuts, nursery products, rice, soybean meal, processed fruits and vegetables, juices and eggs.  Mexico:  red meats, processed fruits and vegetables, poultry meat, fresh vegetables, tree nuts, wheat, soybean meal, animal fats, dairy products and rice.  This broad cross section of commodities suggests the benefits of NAFTA are widely distributed across U.S. agriculture.

Advantages cont……. Import competition has increased for some commodities.  U.S. imports from Canada have grown strongly, providing American consumers with competitively priced, high-quality products. In 1993, U.S. goods faced an average tariff barrier at the Mexican border of about 10%, five times the 2.07% rate that the United States imposed on Mexican goods.  With NAFTA, Mexico’s average tariff has fallen to about 2%.  U.S. imports and exports have grown.  Without NAFTA, the U.S. would have lost expanded export opportunities. U.S. agricultural exports to Mexico have more than doubled.   Mexico is now our second largest market, taking over that rank from Japan in 2004.

Disadvantages NAFTA allowed U.S. manufacturers to move jobs to lower-cost Mexico. Those manufacturers that remained had to decrease wages to compete. 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. Since the cost of labor is cheaper in Mexico, many manufacturing industries moved part of their production from high-cost U.S. states. Employers in industries that could move to Mexico used that as a threat during union organizing drives, thus suppressing wage growth. Maquiladora program: U.S. owned companies employ Mexican workers near the border to cheaply assemble products for "export" to the U.S. Workers are exploited. Mexico agribusiness has increased its use of fertilizers and other chemicals, costing $36 billion per year in pollution.