What is NAFTA? NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S. and Mexico making it the world’s largest free trade area in terms of GDP. As of January 1, 2008, all tariffs between the three countries have have been eliminated. Between 1993-2007, trade tripled from $297 billion to $930 billion. (Source: USTR, U.S. - Mexican Officials Meet to Discuss NAFTA, January 11, 2008; NAFTA: Myth versus Fact, March 18, 2008)

When Was NAFTA Started? NAFTA was signed by U.S. President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the legislatures of the three countries in 1993. The U.S. House approved it by 234 to 200 on November 17 and the Senate by 60 to 38 on November 20. It was signed into law by President Bill Clinton on December 8, 1993 and entered force January 1,1994. Although it was started by President Bush, it was a priority of President Clinton's, and its passage is considered one of his first successes. (Source: History.com, NAFTA Signed into Law, December 8, 1993.

How Was NAFTA Started? The impetus for NAFTA actually began with President Ronald Regan, who campaigned on a North American common market. In 1984, Congress passed the Trade and Tariff Act. This is important because it gave the President "fast-track" authority to negotiate free trade agreements, while only allowing Congress the ability to approve or disapprove, not change negotiating points. Canadian Prime Minister Mulroney agrees with Reagan to begin negotiations for the Canada-U.S. Free Trade Agreement, which was signed in 1988, went into effect in 1989 and is now suspended due to NAFTA. (Source: NaFina, NAFTA Timeline) Meanwhile, Mexican President Salinas and President Bush began negotiations for a liberalized trade between the two countries. Prior to NAFTA, Mexican tariffs on U.S. imports were 250% higher than U.S. tariffs on Mexican imports. In 1991, Canada requests a trilateral agreement, which then led to NAFTA. In 1993, concerns about liberalization of labor and environmental regulations led to the adoption of two addendums to NAFTA. (Source: Infoplease.com, NAFTA)

Why Was NAFTA Formed? Article 102 of the NAFTA agreement outlines its purpose: Grant the signatories Most Favored Nation status. Eliminate barriers to trade and facilitate the cross-border movement of goods and services. Promote conditions of fair competition. Increase investment opportunities. Provide protection and enforcement of intellectual property rights. Create procedures for the resolution of trade disputes. Establish a framework for further trilateral, regional and multilateral cooperation to expand NAFTA's benefits. (Source: NAFTA Secretariat, NAFTA FAQ)

Advantages of NAFTA? NAFTA created the world’s largest free trade area, linking 439 million people and producing $15.3 trillion in goods and services annually. Estimates are that NAFTA increases U.S. GDP by as much as .5% a year. That's because its elimination of tariffs and agreements on international rights for business investors increases trade and capital, spurring business growth. Elimination of tariffs also reduces inflation, by decreasing costs of imports. (Source: USTR, Quantification of NAFTA Benefits)

Increase in U.S. Agricultural Exports: Increase in Trade: Trade between the NAFTA signatories tripled, from $297 billion in 1993 to $903 billion in 2007. Specifically, U.S. goods exports to Canada and Mexico grew 157%, from $142 billion to $364.6 billion. Exports from Canada and Mexico to the U.S. grew 231%, from $151 billion in to $501 billion. NAFTA provides the ability for firms in member countries to bid on government contracts. It also protect intellectual properties. Increase in U.S. Agricultural Exports: NAFTA is especially helpful for agricultural exports because it reduces high Mexican tariffs. Mexico is the top export destination for beef, rice, soybean meal, corn sweeteners, apples and beans. It is the second largest for corn, soybeans and oils. As a result of NAFTA, the percent of U.S. agricultural exports to Canada and Mexico has grown from 22% in 1993 to 30% in 2007. (Source: USTR, NAFTA Facts, March 2008)

Increase in Trade of Services: More than 40% of U.S. GDP is services, including financial services and health care. These aren't as easily transported as are goods, so being able to expand services to nearby countries is important. Thanks to NAFTA, U.S. services exports to Canada and Mexico grew 125%, from $25 billion to $62 billion in 2006. Services exports from Canada and Mexico grew to $37 billion. NAFTA eliminates trade barriers in nearly all service sectors. Service industries are often highly regulated, and the regulations aren't always apparent. NAFTA requires authorities to use open administrative procedures and publish all regulations. Increase in Foreign Direct Investment: Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico tripled to $331 billion (as of 2006, latest data available). Canadian and Mexican FDI in the U.S. was $165 billion. NAFTA reduces risk for investors by guaranteeing they will have the same legal rights as local investors. It also guarantees they will receive fair market value for their investments in case the government decides to nationalize the industry or take the property by eminent domain. NAFTA provides a legal mechanism for investors to make claims against a government, if needed. (Source: USTR, NAFTA Section Index)

Disadvantages of NAFTA: Loss of U.S. Jobs: Since the cost of labor is cheaper in Mexico, many manufacturing industries moved part of their production from high-cost U.S. states. Between 1994 and 2002, the U.S. lost 1.7 million jobs but gained 794,00 jobs, for a net loss of 879,000 jobs of which 78% were in manufacturing. States hit particularly hard include California, New York, Michigan and Texas. These states have high concentrations of industries (such as motor vehicles, textiles, computers, and electrical appliances) which moved a large number of plants to Mexico. (Source: Economic Policy Institute, The High Cost of Free Trade, November 17, 2003) Lower U.S. Wages: Employers in industries that could move to Mexico used that as a threat during union organizing drives, thus suppressing wage growth. Between 1993 and 1995, 50% of all companies used the threat; by 1999, that rate had grown to 65%.

Mexico's Farmers Are Being Put Out of Business: Thanks to the 2002 Farm Bill, U.S. agribusiness is heavily subsidized - as much as 40% of net farm income. As tariffs are removed, corn and other food is exported to Mexico below cost. This benefits consumers, who pay less for food, but makes it impossible for rural Mexican farmers to compete. In contrast, between 1990-2001, Mexico decreased its subsidies to farmers from 33.2% to 13.2% of total farm income. Most subsidies go to Mexico's large firms. (Source: International Forum on Globalization, Exposing the Myth of Free Trade, February 25, 2003; The Economist, Tariffs and Tortillas, January 24, 2008) Maquiladora Workers Are Exploited: NAFTA caused an increase of the maquiladora program, in which U.S. owned companies employ Mexican workers near the border to cheaply assemble products for "export" to the U.S. This now comprises 30% of Mexico's labor force. These workers have "no labor rights or health protections, workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a pregnancy test when applying for a job," according to Continental Social Alliance. (Source: Worldpress.org, Lessons of NAFTA, April 20, 2001)

Degradation of Mexico's Environment Has Increased: In response to NAFTA competitive pressure, Mexico agribusiness has increased its use of fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers have expanded into more marginal land, resulting in deforestation at a rate of 630,000 hectares per year. (Source: Carnegie Endowment, NAFTA's Promise and Reality, 2004)

- Free trade increases sales and profits for U.S. businesses, Pros: Proponents support U.S. free trade agreements because they believe that: - Free trade increases sales and profits for U.S. businesses, thus strenghtening the economy - Free trade creates U.S. middle-class jobs over the long-term - Free trade is an opportunity for the U.S. to provide financial help to some of the world's poorest countries Cons: Opponents of U.S. free trade agreements believe that: - Free trade has caused more U.S. jobs losses than gains, especially for higher-wage jobs. - Many free trade agreements are bad deals for the U.S.