Public International Law Assignment
TREATY ON NORTH AMERICAN FREE TRADE
AGREEMENT
INTRODUCTION
The North American Free Trade Agreement (NAFTA) is a trade pact among Canada,
Mexico, and the United States, forming a trilateral trade bloc in North America. Implemented
on January 1, 1994, it replaced the Canada–United States Free Trade Agreement. As of 2010,
NAFTA constituted the world’s largest trade bloc based on the combined GDP of its member
nations. The agreement fosters economic expansion, encourages trade, attracts investment,
strengthens business collaborations, supports small and medium-sized enterprises, and
ensures fair and predictable trade conditions. Additionally, NAFTA promotes environmental
conservation and enhances job opportunities across North America.
The participating countries' commerce in products and services has increased dramatically
since the passage of NAFTA. According to the customs authorities of the three nations,
exporters and producers must adhere to the Rules of Origin, which are specified in NAFTA
and its implementing laws, in order for their products to be classified as "originating goods."
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When imported into any of the member nations, items that meet these requirements are
eligible for the preferential tariff advantages of NAFTA.
Each Party's Customs Administration must do verifications to guarantee that products getting
NAFTA preferential tariff treatment comply with the Rules of Origin. The three Customs
Administrations have worked together to create verification standards because they
understand how important it is to have transparent verification processes. The general
concepts, testing methods, and reporting requirements for NAFTA origin verifications are
described in these recommendations.
The Direction of International Audit in Mexico's Ministry of Finance and Public Credit, the
Origin Audits Unit of Revenue Canada, and the Regulatory Audit and Field Operations
offices of the U.S. Customs Service are the main users of this manual, which was created
after consultations with all Parties. However, when necessary, other departments under each
Customs Administration may also consult pertinent areas.
It is difficult to isolate the impacts of NAFTA on its member nations because of other notable
economic shifts that have occurred throughout the last ten years. However, by lowering trade
barriers and increasing market access, NAFTA significantly influenced the macroeconomic
climate in Mexico. The main features of NAFTA and the modifications to trade barriers
between member countries are described in depth in Section II. However, as discussed in
Section III, determining the precise effects of these modifications is difficult because many of
them were foreseen long before the agreement was ratified and were implemented gradually.
Mexico and its NAFTA partners were also impacted by a number of other significant
economic shocks during this time, such as:
(i) The severe financial crisis that struck Mexico in 1994, known as the Tequila
Crisis, which led to a sharp devaluation of the peso.
(ii) The numerous other free trade agreements that NAFTA member countries
entered into during the same period.
(iii) The broader global economic cycle, which included a recovery from the early
1990s recessions, a period of strong economic growth until the end of the decade,
and a more recent global downturn.
Mexico's economic cycles have been greatly impacted by the increased regional integration
among NAFTA members. Mexico's production variability decreased when NAFTA was
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implemented, as seen in Section V, and Section VI shows that the NAFTA region's business
cycle synchronization has significantly increased over the last ten years. According to a more
thorough examination of a dynamic latent factor model, these patterns are the result of
structural changes in Mexico's economy, which lessen the effect of shocks particular to the
nation on its economic cycle and increase the influence of shocks that affect the whole
region. A stochastic dynamic general equilibrium model adjusted to represent important
features of NAFTA economies offers more proof of structural impacts. The model
demonstrates that lowering trade barriers, which facilitates greater trade flows, can lead to
increased business cycle interdependence.
Over the previous ten years, Mexico's economic development appears to have benefited from
NAFTA. Numerous research, described in Section VII, corroborate this conclusion. Notably,
once NAFTA went into effect, Mexico's average investment growth rate significantly
increased. After the agreement went into force, the country's economic development patterns
also changed, with investment and exports contributing much more to GDP growth.
Furthermore, recent empirical studies employing data at the business and industry levels
show that NAFTA has significantly increased Mexico's total factor productivity.
OBJECTIVES
According to the Mexican government, modernizing agriculture, increasing productivity, and
reducing the exorbitant expenses of agricultural subsidies were among the main objectives of
NAFTA. Although these goals have been partially met in the Yaqui Valley, official policies
have mostly ignored the social effects of NAFTA, despite the fact that they were expected.
Positively, with the help of private investment, the Yaqui Valley's agriculture is rapidly
becoming more diverse. Foreign businesses that support contemporary production technology
have played—and are anticipated to continue playing—a vital role in Mexico's economy,
despite the fact that foreign direct investment in agriculture has not grown as much as in other
areas. Environmental variables and government regulations both influence changes in
agricultural productivity in the area. Drought, as Luque Favela points out, has regrettably
been a major factor in the advancement of diversification as farmers realize the necessity of a
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variety of crops and numerous revenue streams to weather market volatility and climate
problems.
Veracruz's agriculture industry was restructured as a result of the drop in maize prices when
NAFTA was put into effect. Many small-scale farmers persisted in farming in spite of
predictions that maize output would decline, relying on the sale of other crops, off-farm
labour, and financial assistance from family members employed in Mexico and overseas to
make ends meet.
Farmers in Veracruz have faced numerous difficulties as a result of NAFTA and insufficient
social safety nets, but many have been remarkably resilient in adjusting to changes in the
economy and taking advantage of new trade possibilities. Ten years later, southern Veracruz
is seeing a resurgence in commercial maize cultivation as farmers work to keep it a lucrative
endeavour. Instead of giving up growing maize in northern Veracruz, farmers have started
selling the husks to new export markets. With farmer groups and cooperative marketing
becoming more well-known as they look to replace lost governmental services with
community-driven projects, cooperation and collaboration have become crucial survival
tactics throughout the state. Although NAFTA reforms aimed to restructure the agricultural
sector and push small farmers out, adapting to the new agricultural landscape has ironically
strengthened many of them, making them more determined to secure their place in Mexico’s
economic future.
Negotiation and U.S. ratification
The three nations' diplomatic negotiations started in 1986, and on December 17, 1992, they
met in San Antonio, Texas, to sign NAFTA. The deal was formally signed by Mexican
President Carlos Salinas, Canadian Prime Minister Brian Mulroney, and U.S. President
George H. W. Bush, all of whom were instrumental in promoting it. Each nation's
parliamentary or legislative body then had to ratify the accord.
Kim Campbell was appointed Prime Minister of Canada and Bill Clinton was elected
President of the United States prior to the conclusion of the discussions. Jean Chrétien had
been appointed Prime Minister of Canada at the time the deal became law.
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In Canada, the planned trade deal between the United States and Canada was a contentious
topic that dominated the 1988 election. Although the Liberals and New Democrats, two anti-
free trade parties, had a larger share of the vote in that election, the Progressive Conservatives
(PCs), who support free trade, were able to gain more seats in Parliament as a result of the
vote split. The Canada-U.S. FTA and NAFTA laws were easily approved by Mulroney and
the PCs with a majority. However, Mulroney resigned on June 25, 1993, as his popularity had
drastically decreased. Kim Campbell replaced him as prime minister and head of the
Conservative Party. Campbell led the PC party into the 1993 election, but the Liberal Party,
led by Jean Chrétien, who ran on a platform of renegotiating or eliminating NAFTA, beat
them handily. Later on, though, Chrétien worked with the recently elected U.S. president to
negotiate two further accords. Bush had tried to expedite the signing before his term expired,
but he ran out of time, so new President Bill Clinton took up the ratification process in the
United States. Clinton included provisions to safeguard American jobs and allay the worries
of several House members before to sending it to the U.S. Senate. Additionally, the
agreement mandated that U.S. partners adhere to U.S.-style environmental rules.
After extensive debate and emotional discussions, the House of Representatives passed
NAFTA on November 17, 1993, with a vote of 234-200. The supporters included 132
Republicans and 102 Democrats. The Senate approved the agreement with a vote of 61-38,
consisting of 34 Republicans and 27 Democrats. Clinton signed the NAFTA bill into law on
December 8, 1993, and it came into effect on January 1, 1994. While signing the bill, Clinton
remarked, "NAFTA means jobs. American jobs and well-paying American jobs. If I didn't
believe that, I wouldn't support this agreement."
PROVISIONS
On January 1, 2008, the North American Free Trade Agreement's (NAFTA) last clauses went
into effect. Farmers, ranchers, and consumers throughout North America benefited from the
substantial increase in agricultural trade and investment between the United States, Canada,
and Mexico brought about by the January 1, 1994, launch of NAFTA, one of the most
successful trade accords in history.
The goal of NAFTA was to eliminate trade and investment restrictions among the United
States, Canada, and Mexico. Tariffs on more than half of Mexico's exports to the United
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States and more than a third of U.S. exports to Mexico were immediately removed when it
went into effect on January 1, 1994. With the exception of a few U.S. agricultural exports to
Mexico, which were to be phased out within 15 years, all U.S.-Mexico tariffs were to be
eliminated within 10 years. The majority of U.S.-Canada commerce was already free of
tariffs. NAFTA also sought to safeguard product intellectual property rights and eliminate
non-tariff trade obstacles.
The Uruguay Round Agreements Act of 1994 was made possible by modifications to U.S.
copyright law brought about by the North American Free Trade Agreement Implementation
Act. The reinstatement of copyright protection for several films that had previously entered
the public domain under NAFTA was one of these modifications.
NAFTA Eliminates Trade Barriers
A number of non-tariff obstacles to agricultural commerce between the US and Mexico were
eliminated in large part due to NAFTA. Prior to January 1, 1994, the largest barrier to U.S.
agricultural exports was Mexico's import licensing system. However, normal tariffs and
tariff-rate quotas essentially superseded this arrangement.
All agricultural tariffs between the United States and Mexico were removed by January 1,
2008. While some tariffs were phased away over periods of 5, 10, or 15 years, several were
eliminated immediately. When the agreement went into force, almost half of the agricultural
trade value was duty-free since the initial tariff cuts applied to a variety of agricultural items.
The Canada-U.S. Free Trade Agreement (CFTA) has already reduced tariffs between the
United States and Canada.
With extended transition periods, tariff-rate limits, and specific safeguard clauses for certain
products, both the US and Mexico protected their import-sensitive industries. But now that
the 15-year transition period is up, all agricultural goods are subject to free trade with
Mexico. Strict rules of origin are also enforced by NAFTA to guarantee that goods made in
North America receive the greatest benefits.
Prior to NAFTA, export items to Mexico were sometimes subject to 30 percent or higher
taxes, and paperwork frequently caused major delays. Furthermore, the average difference
between Mexican and U.S. tariffs on U.S.-made goods was 250 percent. This disparity was
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resolved by NAFTA, which phased away tariffs over a 15-year period. When the agreement
went into force, around half of these duties were promptly withdrawn, and the other levies
were gradually lowered as well. Construction, engineering, accounting, advertising,
consulting/management, architecture, healthcare management, commercial education, and
tourism are among the industries that are particularly covered by NAFTA.
Non-tariff obstacles were removed by 2008, which included easing border processing and
licensing requirements and permitting U.S. trucks to enter Mexico's interior as well as the
border. The main obstacle for small exporters attempting to conduct business in Mexico had
been non-tariff restrictions.
In addition, the three NAFTA nations decided to raise their industrial, health, and safety
standards to match the highest requirements in each of the three nations, usually those of the
United States or Canada. Furthermore, national norms may no longer represent a trade
restriction. Additionally, export-product certifications and inspections became more efficient.
NAFTA had unique side agreements to allay worries that Mexico's lower wages might entice
American businesses to relocate their manufacturing there and to guarantee that the country's
expanding industrialization wouldn't cause widespread pollution. With the power to levy
heavy fines on any of the three countries that did not regularly implement their rules, these
accords created commissions to monitor labour and environmental concerns. However, the
absence of enforcement of the rules and restrictions set forth in these additional agreements
has been often criticized by labour and environmental organizations in both the United States
and Canada.
Additionally, the range of goods exchanged between Mexico and its partners increased
significantly as a result of NAFTA. According to research, the expansion of product diversity
accounted for about 25% of the 190 percent increase in Mexico's exports to the United States
and more than 8% of the 93 percent increase in U.S. exports to Mexico. For instance, from
less than 1% in 1988 to 15% in 1999, "motor cars for passenger transport and engines" made
up a larger portion of Mexico's overall exports to the US.
Protection for Import-Sensitive Products
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Countries have the authority to take emergency action if a spike in imports hurts domestic
manufacturers, as stated in Chapter 11 of the U.S.-Canada Free Trade Agreement and Article
XIX of the General Agreement on Tariffs and Trade (GATT). Through Chapter 8, which
permits member nations to enact temporary emergency safety measures under certain
circumstances, this idea was included into NAFTA. If imports seriously damage or threaten
to seriously impair domestic sectors, this may entail hiking duties to the Most Favoured
Nation (MFN) level. As long as the requirements were completed, a NAFTA nation could use
a Chapter 8 safeguard provision in 2008 until January 1, 2009, which is one year after
NAFTA was fully implemented. Only with the consent of the nation whose products would
be impacted by the action could such a safeguard be maintained after that date.
Other Key NAFTA Provisions
Sanitary and Phytosanitary Measures:
Regulations pertaining to the development, application, and enforcement of sanitary and
phytosanitary (SPS) measures are established by NAFTA. These steps are meant to safeguard
the health of people, animals, and plants against threats from pollutants, pests, illnesses, and
food additives. The agreement permits each nation to defend domestic agriculture against the
introduction of dangerous pests and diseases through imports, while also ensuring that SPS
measures are not abused as covert trade barriers.
A number of clauses pertaining to investment, financial services, government procurement,
and intellectual property protection were included in NAFTA. It offered protections for direct
investors' rights and drastically lowered investment obstacles. With several limitations, the
agreement's financial services clauses permitted the development of enterprises in the
banking, insurance, and securities sectors. NAFTA eliminated the majority of "Buy National"
prohibitions on government procurement, allowing companies from participating nations to
provide non-defence products and services to the federal and state governments. The
agreement also established thorough guidelines for the defence and upholding of intellectual
property rights in each of the participating countries.
While NAFTA promotes the adoption of international and regional standards among its
trading partners, it also acknowledges each country’s right to establish its own level of
protection. This flexibility enables nations to implement stricter standards, provided they are
supported by scientific evidence. Additionally, NAFTA permits state and local governments
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to enforce regulations that are more stringent than national standards, as long as they are
scientifically justified and applied in a transparent and efficient manner.
1. Export Subsidies:
The three nations that make up NAFTA work together to eradicate export subsidies
globally. NAFTA allows the United States and Canada to offset subsidized exports
from other countries by offering export subsidies in the Mexican market, subject to
certain restrictions. However, direct export subsidies for agricultural products sold to
each other are prohibited. Additionally, while subsidizing agricultural exports to third-
party nations, the United States and Canada must consider each other's export
interests.
2. Internal Support:
Member nations are urged under NAFTA to implement domestic support programs
that reduce trade and production distortions or that conform to World Trade
Organization agreements exempt from domestic support reduction.
3. Grade and Quality Standards:
The United States and Mexico agreed to give equivalent imported items meant for
processing the same preferential treatment if any nation takes actions pertaining to the
grading, marketing, or categorization of locally produced commodities.
COMMITTEE HELP IMPLEMNTATION
The NAFTA Committee on Agricultural Trade supervises and promotes cooperation in the
administration and execution of the agreement's agricultural provisions. It gives the three
member nations a forum to talk about trade-related topics and resolve problems that may
come up during the agreement's implementation. A comprehensive work plan and terms of
reference for 1996/97 were created during formal meetings held in Washington on April 30,
1996, and Ottawa on June 18, 1996. The Advisory Committee, which would include of
members from each nation's industry, was set to convene for the first time in February 1997.
The Working Group also met in Ottawa on June 18, 1996, to discuss how to carry out its
mandate to end export subsidies that affect trade in agricultural products. To this end, the
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parties agreed on a joint work plan for 1996/97, emphasizing cooperative research and
potential coordination of positions in international forums.
The NAFTA Committee on Sanitary and Phytosanitary (SPS) Measures promotes technical
cooperation, including discussions on SPS-related issues, and seeks to harmonize and
acknowledge equivalency in SPS legislation. This committee reviews and discusses topics
related to the SPS area at regular meetings. The Pesticides Technical Working Group (TWG)
was established in 1995 under Article 722 of NAFTA to address issues pertaining to
pesticides that affect the United States, Canada, and Mexico. For pertinent pesticide
problems, the TWG may additionally report to the NAFTA Committee on Standards-Related
Measures, even though its primary reporting body is the SPS Committee. Representatives
from the TWG met for the first time in Washington from March 27–29, 1996, to address
ongoing efforts to align pesticide registration procedures and maximum residue limits
(MRLs) with scientific and policy issues in pesticide management. The following conference
was set for Ottawa in November 1996.
Initiatives to lower possible trade barriers will be the main emphasis of the NAFTA
Committee on Sanitary and Phytosanitary (SPS) Measures in the upcoming year. The group
will endeavour to find fresh chances for standardization and mutual acceptance of
regulations. Standardizing pesticide registration processes, setting uniform veterinary
medication residue limits, and coordinating pesticide and food additive tolerances are top
goals. The committee will also formally establish its cooperation with current trilateral and
bilateral working groups. Along with addressing trade problems pertaining to genetically
modified materials, it will also continue to promote information sharing and provide a forum
for bilateral talks.
The three nations receive recommendations from the NAFTA Advisory Committee on
Private Commercial issues Regarding Agricultural Goods for settling private commercial
issues involving agricultural transactions. Ensuring prompt and efficient resolution of such
disagreements is the aim, especially when it comes to perishable items. Although there are
government representation on the committee, the majority of its members are from the private
sector. Additionally, the Consultative Committee on Agriculture (CCA) facilitates yearly
meetings between the United States and Canada and Mexico. The purpose of these sessions is
to guarantee that NAFTA is implemented correctly and completely.
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NAFTA mandates the Advisory Committee on Private Commercial Disputes (Committee) to
report to the NAFTA Commission and provide recommendations on general matters referred
to it by the Commission. These matters concern the availability, use, and effectiveness of
arbitration and other methods for resolving private international commercial disputes within
the free trade area.
MECHANISM
In publications like as the World Bank's Lessons from NAFTA for Latin America and the
Caribbean, NAFTA's Impact on North America, and NAFTA Revisited by the Institute for
International Economics, economists have evaluated both the advantages and disadvantages
of NAFTA. Even after taking into consideration the 1994–1995 economic crisis, some
contend that NAFTA has benefited Mexico, resulting in decreases in poverty and gains in
real income, especially through decreased food costs. Others argue that NAFTA has mostly
benefited elites and company owners in all three nations, while hurting Mexican farmers
because of the low-cost imports of American agriculture and the job losses of American
manufacturing workers. Critics also say that the deal has led to increased inequality in both
the U.S. and Mexico. According to some analysts, NAFTA hasn't done enough or hasn't
produced economic convergence or substantially decreased poverty rates fast enough. There
are recommendations that Mexico should increase its educational spending and encourage
innovation in infrastructure and agriculture if it hopes to fully profit from the accord.
If an investor from one Party experiences a loss or damage as a result of another Party's
noncompliance with the rules or regulations pertaining to State enterprises specified in
Article 1502.2 and Article 1503.3 of the Agreement, they may utilize the dispute resolution
procedure for themselves or on behalf of an enterprise. However, access to the dispute
resolution process cannot be initiated by the receiving Party just adopting an action that
violates its commitments. The investor must show that the loss or harm was directly brought
on by a violation of a Chapter requirement.
Government to Government Negotiations
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Government talks offer a forum for settling conflicts before they become the subject of court
cases or inquiries. While some conversations have taken place in standing committees, such
as the Committee on Agricultural Trade and the Committee on Sanitary and Phytosanitary
Measures (SPS Committee), ad hoc negotiations have been used to resolve trade disputes as
they emerge. In addition to providing a platform for discussions on agricultural trade issues,
the Committee on Agricultural Trade is in charge of monitoring and fostering collaboration in
the application of NAFTA's agricultural provisions. For example, the NAFTA Committee on
Agricultural Trade was able to clarify and publish the Mexican standards for providing SPS
import licenses for wheat imports following negotiations.
Promoting technical collaboration among NAFTA members and offering a forum for
consultation on SPS measures have been the responsibilities of the NAFTA SPS Committee.
Conflicts over SPS measures, which have grown dramatically in recent years, have been
lessened and resolved thanks to this. The implementation of "regionalization" in NAFTA,
which was first introduced in the Canada-U.S. Free Trade Agreement, refined in the WTO
SPS Agreement, and extended in NAFTA's SPS provisions, is one noteworthy
accomplishment. The process of declaring some areas of a nation as being free of particular
illnesses or pests, even while these problems are present in other areas of the nation, is known
as regionalization. Despite SPS laws that would normally prevent it, this permits some
commerce to take place.
Although NAFTA does not cover domestic programs, government negotiations have
successfully addressed cases where domestic policies or programs had significant trade
implications, helping to resolve conflicts between incompatible policies or regulations.
Examples include the negotiated adjustments to Mexico's dry bean auction system to stabilize
auction schedules and clarify the criteria for qualified bidders, as well as the U.S. allocation
for Canada under the U.S. sugar and sugar-containing products TRQs.
INDUSTRY
U.S. commerce with Canada and Mexico has increased more quickly than U.S. trade overall
since 1994. It is difficult to determine the precise effects of NAFTA on certain industry,
though. The most significant shifts in trade flows have occurred in the automobile, textile,
and garment industries, which may have had an impact on employment levels in these
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sectors. NAFTA is not entirely responsible for changes in trade and investment trends after
1994; other variables, like as the 1990s economic boom in the United States and the 1995
depreciation of the Mexican peso, also contributed. Five significant U.S. industries with
significant trade volumes with Mexico and Canada are examined in this section: computer
equipment, textiles and clothing, automobile, chemicals and related goods, and
microelectronics.
The U.S. economic expansion in the 1990s may be the most significant factor to consider
when evaluating trade trends since NAFTA. As the U.S. economy grew, so did its demand
for imports. Some of the increase in imports from Mexico following NAFTA's
implementation could be attributed to this economic growth, rather than solely to the
reduction of trade barriers. Additionally, the 1995-peso devaluation decreased the purchasing
power of the Mexican population, which likely led to a short-term reduction in Mexico's
demand for imports from the United States.
In terms of overall U.S. commerce, the automobile sector saw the largest dollar growth
($71.48 billion). The textile and clothing sector saw the largest gain in percentage terms
(22%). Computer equipment accounted for 397 percent of the rise in U.S. imports from
Mexico and Canada, while textiles and clothing accounted for 386 percent. The automobile
industry's imports increased by the most in terms of dollars ($49.66 billion). The automobile
sector saw the largest dollar rise ($21.82 billion) in exports, while the microelectronics sector
saw the largest percentage growth (268%).
In Mexico, maquiladoras—factories that transform imported raw materials into items for
export—have come to represent trade. These manufacturers, many of which moved outside of
the US, have raised concerns about American job losses. Hufbauer (2005) claims that since
the 1994 implementation of NAFTA, salaries in the maquiladora industry have increased by
15.5%. Over the past five years, exports from maquiladora-border states have declined while
exports from non-border states have increased due to the trade agreement's benefits to other
industries. As a result of this change, non-border cities like Toluca, Leon, and Puebla have
grown significantly, surpassing Tijuana, Ciudad Juarez, and Reynosa in population.
Increased demand for American goods in Mexico and Canada may have helped certain U.S.
businesses by creating jobs, while other industries have seen employment losses. As
previously mentioned, there is a dearth of data about the effects of NAFTA, making it
difficult to estimate how it would affect certain American industries. It's possible that the
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trade-related employment gains and losses since NAFTA aren't entirely attributable to the
pact; rather, they may have been the result of accelerated trends that were already underway.
Numerous economic factors that affect trade and employment levels make measuring these
effects difficult. For instance, the 1995 Mexican peso devaluation resulted in cheaper wages
in Mexico, which would have encouraged American businesses to relocate there in order to
cut manufacturing costs. influenced the demand for products and investment choices.
AGRICULTURE
Like practically all free trade agreements under the WTO framework, agriculture has been a
controversial topic throughout NAFTA discussions. Agriculture, in contrast to other sectors,
was not trilaterally negotiated; rather, each pair of nations entered into three distinct accords.
While the Mexico-U.S. pact permits further liberalization with phase-out periods, the
Canada-U.S. agreement imposes significant tariff limits and limitations on agricultural items
such as chicken, dairy, and sugar. This was the first agricultural free trade agreement between
the North and the South.
There is disagreement on the effects of the Mexico-US agriculture accord. Mexico's
impoverished people's living conditions deteriorated as a result of the country's failure to
invest in essential infrastructure, such as effective roadways and trains. But NAFTA is not the
only factor contributing to rural poverty. Mexico's agricultural exports expanded by 9.4% a
year between 1994 and 2001, but imports only increased by 6.9% during that time.
The meat industry has been significantly impacted by NAFTA. Before 1994, Mexico was a
minor player in the U.S. export market, but by 2004, it had become the second-largest
importer of U.S. agricultural products, with NAFTA playing a major role in this shift. The
agreement eliminated trade barriers, facilitating business between the two countries. As a
result, Mexican farmers have helped expand the U.S. meat market, leading to increased sales
and profits for the U.S. meat industry. This growth is mirrored by a rise in Mexican per capita
GDP, which has driven changes in meat consumption patterns, as Mexicans now have the
financial means to purchase more meat, leading to higher per capita consumption.
Since NAFTA's implementation, corn production in Mexico has increased. However, the
demand for corn within Mexico has surpassed its domestic supply, necessitating imports that
exceed the original quotas Mexico had negotiated. Zahniser & Coyle have noted that while
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corn prices in Mexico, adjusted for international levels, have fallen significantly, production
has remained stable since 2000, thanks to subsidies introduced by former President Vicente
Fox. The natural consequence of lower commodity prices is increased downstream usage, but
many rural Mexicans, who might have produced higher-margin value-added products, have
instead migrated abroad. The rise in corn prices due to greater ethanol demand may benefit
Mexican corn farmers.
CONCLUSION
Although NAFTA has been a major trade deal that has improved GDP and commerce, it has
also had unfavourable effects such increased migration, job losses, and inequality. For the
three participating nations—Canada, the United States, and Mexico—the pact has brought
about both possibilities and difficulties. Resolving the negative effects it has produced is
essential to the deal's long-term viability.
Although NAFTA has had a largely good influence on trade liberalization, especially for
Mexico, it has not been without its problems. Although commerce has increased in Mexico,
the country has not created enough jobs to meet domestic demand. Mexico's agriculture
sector lost 1.3 million jobs between 1994 and 2000, while the manufacturing sector added
500,000 jobs. Furthermore, most Mexicans' actual salaries are lower now than they were
before to NAFTA, with the 1994–1995-peso crisis—rather than the trade pact itself—largely
to blame for wage stagnation. The absence of wage convergence with the United States
exacerbates this stagnation. The influx of Mexicans into the United States has continued
despite expectations that trade liberalization would decrease migration. Actually, the peso
crisis and job possibilities in the United States are more to blame for the rise in migration
than NAFTA.
There have also been environmental concerns raised. The true effects on Mexico's
environment are complicated, despite early concerns about a "race to the bottom" in
environmental standards. Mexico's economy has gotten cleaner in some areas while getting
worse in others. NAFTA has hastened the expansion of commercial farming, which has
harmed the environment by causing pollution and deforestation, especially in southern
Mexico. The economic benefits of trade have been overwhelmed by these environmental
drawbacks.
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The overall impact of NAFTA on rural areas in Mexico is especially noticeable. Rural
households were unprepared for the economic, social, and environmental shocks brought on
by the shift to a liberalized economy. These households have adjusted by growing more basic
crops and working off the farm, frequently in industries or maquiladoras. Remittances from
family members employed in the United States have become an essential source of income
for many rural labourers who have transitioned from agriculture to non-agricultural jobs in
order to sustain their families. However, the ecosystem is being endangered by this reliance
on labour in the unorganized sector, illicit logging, and poaching for fuel and food.
NAFTA has not had a completely terrible effect on Mexico, despite the drawbacks. Though it
hasn't established the support networks that the populace needs to deal with the ensuing
changes, it has sped up Mexico's transition to a more liberalized economy. It is imperative to
implement measures like social safety nets, worker rights, and environmental safeguards to
guarantee that future trade deals do not result in same suffering. By taking these steps,
vulnerable people may be shielded from the shocks that come with being more exposed to
international competition.
The effects of NAFTA have been less noticeable in the United States. NAFTA has had a
lower impact on the U.S. economy because of its bigger and more diverse economy, even if it
did cause certain trade imbalances and job losses, particularly in the manufacturing sector.
With the wealthiest families receiving a bigger portion of the national income and lower-
skilled workers' salaries stagnating, economic inequality in the United States has been
increasing. It is impossible to ignore how NAFTA has affected salaries and job security in
addition to contributing to this imbalance.
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