2. North American Free Trade Agreement

3. North American Free Trade Agreement ( NAFTA ) I.Scope §NAFTA Population:387 million §15 Nation EU Population:373 million §NAFTA GNP: $8 trillion §EUROPE GNP: $8 trillion §Size of Trade Relationships: §U.S./Canada:$406 billion §U.S./Mexico:$248 billion §Canada/Mexico:$ 20 billion

4. Top Ten 2000 U.S. Trading Partners ($ billions) Canada$176.4$229.2$405.6-$52.8 Mexico111.7135.9247.6-24.2 Japan65.3146.5211.8-81.3 China16.3100.0116.3-83.8 Germany29.3558.788.0-29.5 United Kingdom41.543.585.0-1.9 South Korea27.940.368.2-12.4 Taiwan24.440.564.9-16.1 France21.029.050.0-8.0 Singapore17.419.637.0-2.2 CountryU.S. ExportsU.S. ImportsTotalSurplus/ Deficit Irwin/McGraw-Hill 2-2 Copyright©2002 by The McGraw-Hill Companies, Inc. All rights reserved.

5. NAFTA II.History § U.S./Canada Free Trade Agreement signed on January 2, 1988 §Impacts on the Agreement: §Elimination of duties §Direct investment in the other country made easier §Easier to market services in the other country §Provides dispute resolution mechanism § USCFTA not without controversy §USCFTA consistent with GATT

6. NAFTA III.General Reasons for Free Trade Agreements - 1. Limits on GATT - 2. Allows for specialization in terms of comparative advantage - 3. Increases potential exports for all parties IV.Enter Mexico (NAFTA) § Political Change §Skyrocketing Trade

7. NAFTA V.Advantages of NAFTA for Mexico In spite of being resource rich, Mexico’s population growing faster than the number of jobs. Needs investment, technology, and exports to spur the economy. VI. Advantages of NAFTA to U.S. § Access to Mexican Labor and Markets §Note: all three nations need the agreement to compete more effectively in world markets

8. NAFTA VII. Primary Objections to NAFTA - 1. Fears of Lost Jobs (U.S./Canada) - 2. Exploitation of Mexican Labor - 3. Environmental Laws - 4. Fears of Loss of Cultural Identity (Canada/Mexico)

9. What NAFTA Will Do - 1. Help Open Mexican Market - 2. Increase Trade - 3. Lower Prices - 4. More Competitive Industries (Globally)

10. What NAFTA Will Not Do - 1. 50% N.A. Origin Needed to Qualify - 2. Decrease Paperwork - 3. Eliminate Technical Standards - 4. Lead to Standardized Transportation

11. §Classifications/Groups - Group of 7 “Industrialized” - NIC’s - LDC’s §Market Characteristics - Purchasing Power Parities §Policy Toward Foreign Investment -Varies by country