North American Free Trade Agreement

OBJECTIVE
The objectives of this Agreement are to:
establish a free trade area in accordance with this Agreement;
promote regional integration through an instrument that contributes to the establishment of the
Free Trade Area of the Americas (FTAA) and to the progressive elimination of barriers to trade
and investment;
create opportunities for economic development;
eliminate barriers to trade in, and facilitate the cross-border movement of goods between the
territories of the Parties;
increase substantially investment opportunities in the territories of the Parties;
facilitate trade in services and investment with a view to developing and deepening the Parties'
relations under this Agreement;
promote conditions of fair competition in the free trade area;
establish a framework for further bilateral, regional and multilateral cooperation to expand and
enhance the benefits of this Agreement; and
create effective procedures for the implementation and application of this Agreement, for its joint
administration and for the resolution of disputes.
The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives
set out in paragraph 1 and in accordance with applicable rules of international law.

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INTRODUCTION
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S.
and Mexico making it the worlds 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.
The North American Free Trade Agreement or NAFTA , French is an agreement signed by the
governments of the United States, Canada, and Mexico creating a trilateral trade bloc in North
America. The agreement came into force on January 1, 1994. It superseded the Canada-United
States Free Trade Agreement between the U.S. and Canada. In terms of combined purchasing
power parity GDP of its members, as of 2007 the trade block is the largest in the world and
second largest by nominal GDP comparison.
The North American Free Trade Agreement (NAFTA) has two supplements, the North American
Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on
Labor Cooperation (NAALC).

NAFTA's naming
American intellectual Noam Chomsky has argued that the only true words in the phrase "North
American Free Trade Agreement" seem to be "North America", as what is called trade is in reality
mostly restricted intra-corporate transfers of products and services. Agreement is lacking as
NAFTA was passed with a lack of democratic oversight protocols and widespread public
opposition.
Adam Smith, states in The Wealth of Nations that free trade includes the labor component as a
factor of production:
"By obstructing the free circulation of labour and stock both from employment to employment, and from
place to place, occasions in some cases a very inconvenient inequality in the whole of the advantages and
disadvantages of their different employments."

Within NAFTA official law and agreements the movement of labor is temporary and
very restrictive, especially for unskilled workers.Mexican (legal and illegal) migration to the USA
is surging, but not due to NAFTA provisions. NAFTA provisions for freedom of movement of
workers are very restrictive compared to one of the economic freedoms of the European Union,
the freedom of movement for workers.

When Was NAFTA Started?

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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 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.

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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.

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Background
In 1988 Canada and the United States signed the Canada-United States Free Trade Agreement.
The American government then entered into negotiations with the Mexican government for a
similar treaty, and Canada asked to join the negotiations in order to preserve its perceived gains
under the 1988 deal. The international climate at the time favoured expanding trade blocs, and
the Maastricht Treaty which created theEuropean Union was signed in 1992.

Following diplomatic negotiations dating back to 1991 between the three nations, the leaders met
in San Antonio, Texas, on December 17, 1992, to sign NAFTA. U.S. President George H.W.
Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas, each
responsible for spearheading and promoting the agreement, ceremonially signed it. The
agreement then needed to be ratified by each nation's legislative or parliamentary branch.
Before the negotiations were finalized, Bill Clinton came into office in the U.S. and Kim
Campbell in Canada, and before the agreement became law, Jean Chrtien had taken office in
Canada.
The proposed Canada-U.S.trade agreement had been extremely controversial and divisive in
Canada, and the 1988 Canadian election was fought almost exclusively on that issue. In that
election more Canadians voted for anti-free trade parties (the Liberals and the New Democrats)
but more seats in parliament were won by the pro-free trade Progressive Conservatives (PCs).
Mulroney and the PCs had a parliamentary majority and were able to easily pass the Canada-U.S.
FTA and NAFTA bills. However Mulroney himself had become deeply unpopular and resigned
on June 25, 1993. He was replaced as Conservative leader and prime minister by Kim Campbell,
who then led the PC party into the 1993 election where they were decimated by the Liberals
under Jean Chrtien. Chrtien had campaigned on a promise to renegotiate or abrogate NAFTA,
but instead negotiated the two supplemental agreements with the new U.S. Democratic president,
and ideological ally, Bill Clinton.

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Facts About NAFTA
1. History of NAFTA
NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S.
and Mexico making it the worlds largest free trade area in terms of GDP. Three U.S. Presidents
were involved in creating it over a decade. Find out how it was created, what its purpose was and
how large it is today.

2. Advantages of NAFTA
NAFTA created the worlds largest free trade area, linking 439 million people and producing
$15.3 trillion in goods and services annually. Estimates are that NAFTA will increase U.S. GDP
by between .1% - .5%. Trade between the NAFTA signatories tripled, from $297 billion in 1993
to $903 billion in 2007. Find out what industries benefited, and how NAFTA specifically
supported this increase in trade.
NAFTA created the worlds 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.

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.

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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.

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3. Disadvantages of NAFTA
NAFTA has been criticized for both displacing American workers and decreasing wage levels for
those that remain. Mexican workers have also suffered, as have Mexican farmers and its
environment. Find out the facts behind these accusations, and how NAFTA contributed to these
problems.
NAFTA has many disadvantages. NAFTA allowed U.S. manufacturers to move jobs to lower-cost
Mexico. Those manufacturers that remained had to decrease wages to compete.
Many of 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.

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,
gaining only 794,00, for a net loss of 879,000 jobs. Most of these jobs(78%) were in
manufacturing. States hit hard included California, New York, Michigan and Texas. These states
had high concentrations of the industries that moved plants to Mexico. These industries included
motor vehicles, textiles, computers, and electrical appliances. (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 of those subsidies go to Mexico's large farms. (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:

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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.

4. U.S. Regional Trade Agreements

How does NAFTA fit within the context of other U.S. regional trade agreements, such as CAFTA,
FTAA, and MEFTI?

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What Are Exchange Rates?
The dollar's exchange rate tells you how much a dollar is worth in a foreign currency, and vice
versa. For example, on March 3, 2008, a dollar was worth $.98 Canadian dollars, 7.01 Chinese
yuan, and 103.57 Japanese yen. The Euro is normally quoted in terms of its dollar value, for some
reason, so one Euro was worth $1.52.

Provisions
The goal of NAFTA was to eliminate monkeys of trade and investment between the USA, Canada
and Mexico. The implementation of NAFTA on January 1, 1994, brought the immediate
elimination of tariffs on more than one half of US imports from Mexico and more than one third
of US exports to Mexico. Within 10 years of the implementation of the agreement all US-Mexico
tariffs would be eliminated except for some US agricultural exports to Mexico that were to be
phased out in 15 years. Most US-Canada trade was already duty free. NAFTA also seeks to
eliminate non-tariff trade barriers.

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NAFTA or North American Free Trade Agreement
NAFTA covers Canada, the U.S. and Mexico making it the world's largest free trade area. By
2008 almost all tariffs will have been eliminated. From 1993 (the initiation of NAFTA) to 2005,
trade increased from $297 billion to $810 billion.

The North America Free Trade Agreement, also known as NAFTA, is a trade agreement between
the United States, Canada, and Mexico. NAFTA eliminated the majority of tariffs on products
traded among the United States, Canada, and Mexico, and gradually phased out other tariffs over
a 15-year period. The treaty also protects intellectual property rights (patents, copyrights, and
trademarks), and outlines the removal of investment restrictions among the three countries. There
have been positive and negative outcomes from the NAFTA agreement. Some argue that NAFTA
has been positive for Mexico, which has seen its poverty rates fall and real income rise, even after
accounting for the 19941995 economic crisis. Others argue that NAFTA has been beneficial to
business owners and elites in all three countries, but has had negative impacts on farmers in
Mexico who saw food prices fall based on cheap imports from U.S. agribusiness, and negative
impacts on US workers in manufacturing and assembly industries who lost jobs. Critics also
argue that NAFTA has contributed to the rising levels of inequality in both the U.S. and Mexico.
Some economists believe that NAFTA has not been enough to produce an economic convergence,
nor to substantially reduce poverty rates. Some have suggested that in order to fully benefit from
the agreement, Mexico must invest more in education and promote innovation in infrastructure
and agriculture. Overall, NAFTA has not caused any trade diversion aside from the textiles and
apparel industry.

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NAFTA's effects, both positive and negative, have been quantified by several economists, whose
findings have been reported in publications such 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. Some argue that NAFTA has been positive for Mexico,
which has seen itspoverty rates fall and real income rise (in the form of lower prices, especially
food), even after accounting for the 19941995 economic crisis. Others argue that NAFTA has
been beneficial to business owners and elites in all three countries, but has had negative impacts
on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness,
and negative impacts on U.S. workers in manufacturing and assembly industries who lost jobs.
Critics also argue that NAFTA has contributed to the rising levels of inequality in both the U.S.
and Mexico. Some economists believe that NAFTA has not been enough (or worked fast enough)
to produce an economic convergence, nor to substantially reduce poverty rates. Some have
suggested that in order to fully benefit from the agreement, Mexico must invest more in education
and promote innovation in infrastructure and agriculture.

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Trade
According to Issac (2005), overall, NAFTA has not caused trade diversion, aside from a few
industries such as textiles and apparel, in whichrules of origin negotiated in the agreement were
specifically designed to make U.S. firms prefer Mexican manufacturers. The World Bank also
showed that the combined percentage growth of NAFTA imports was accompanied by an almost
similar increase of non-NAFTA exports.

Industry
Maquiladoras (Mexican factories which take in imported raw materials and produce goods for
export) have become the landmark of trade in Mexico. These are plants that moved to this region
from the United States, hence the debate over the loss of American jobs. Hufbauer's (2005) book
shows that income in the maquiladora sector has increased 15.5% since the implementation of
NAFTA in 1994. Other sectors now benefit from the free trade agreement, and the share
of exports from non-border states has increased in the last five years while the share of exports
from maquiladora-border states has decreased. This has allowed for the rapid growth of nonborder metropolitan areas, such as Toluca, Lenand Puebla; all three larger in population
than Tijuana, Ciudad Jurez, and Reynosa. The main non-maquiladora industry that has suffered
from NAFTA is the automobile industry.

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Environment
Securing U.S. congressional approval for NAFTA would have been impossible without
addressing public concerns about NAFTAs environmental impact. The Clinton administration
negotiated a side agreement on the environment with Canada and Mexico, the North American
Agreement on Environmental Cooperation (NAAEC), which led to the creation of
the Commission for Environmental Cooperation (CEC) in 1994. To alleviate concerns that
NAFTA, the first regional trade agreement between a developing country and two developed
countries, would have negative environmental impacts, the CEC was given a mandate to conduct
ongoing ex post environmental assessment of NAFTA.
In response to this mandate, the CEC created a framework for conducting environmental analysis
of NAFTA, one of the first ex post frameworks for the environmental assessment of trade
liberalization. The framework was designed to produce a focused and systematic body of
evidence with respect to the initial hypotheses about NAFTA and the environment, such as the
concern that NAFTA would create a race to the bottom in environmental regulation among the
three countries, or the hope that NAFTA would pressure governments to increase their
environmental protection mechanisms. The CEC has held four symposia using this framework to
evaluate the environmental impacts of NAFTA and has commissioned 47 papers on this subject.
In keeping with the CECs overall strategy of transparency and public involvement, the CEC
commissioned these papers from leading independent experts.
Overall, none of the initial hypotheses was confirmed. NAFTA did not inherently present a
systemic threat to the North American environment, as was originally feared, but NAFTA-related
environmental threats instead occurred in specific areas where government environmental policy,
infrastructure, or mechanisms, were unprepared for the increasing scale of production under trade
liberalization. In some cases, environmental policy was neglected in the wake of trade
liberalization; in other cases, NAFTA's measures for investment protection, such as Chapter 11,
and measures against non-tariff trade barriers, threatened to discourage more vigorous
environmental policy.[16] The most serious overall increases in pollution due to NAFTA were
found in the base metals sector, the Mexican petroleum sector, and the transportation equipment
sector in the United States and Mexico, but not in Canada.

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Agriculture
From the earliest negotiation, agriculture was (and still remains) a controversial topic within
NAFTA, as it has been with almost all free trade agreements that have been signed within
the WTO framework. Agriculture is the only section that was not negotiated trilaterally; instead,
three separate agreements were signed between each pair of parties. The CanadaU.S. agreement
contains significant restrictions and tariff quotas on agricultural products (mainly sugar, dairy, and
poultry products), whereas the MexicoU.S. pact allows for a wider liberalization within a
framework of phase-out periods (it was the first NorthSouth FTA on agriculture to be signed).
The overall effect of the MexicoU.S. agricultural agreement is a matter of dispute. Mexico did
not invest in the infrastructure necessary for competition, such as efficient railroads and
highways, creating more difficult living conditions for the country's poor. Still, the causes of rural
poverty cannot be directly attributed to NAFTA; in fact, Mexico's agricultural exports increased
9.4 percent annually between 1994 and 2001, while imports increased by only 6.9 percent a year
during the same period.
Production of corn in Mexico has increased since NAFTA's implementation. However, internal
corn demand has increased beyond Mexico's sufficiency, and imports have become necessary, far
beyond the quotas Mexico had originally negotiated. Zahniser & Coyle have also pointed out that
corn prices in Mexico, adjusted for international prices, have drastically decreased, yet through a
program of subsidies expanded by former president Vicente Fox, production has remained stable
since 2000.
The logical result of a lower commodity price is that more use of it is made downstream.
Unfortunately, many of the same rural people who would have been likely to produce highermargin value-added products in Mexico have instead emigrated. The rise in corn prices due to
increased ethanol demand may improve the situation of corn farmers in Mexico.
In a study published in the August 2008 issue of the American Journal of Agricultural Economics,
NAFTA has increased U.S. agricultural exports to Mexico and Canada even though most of this
increase occurred a decade after its ratification. The study focused on the effects that gradual
"phase-in" periods in regional trade agreements, including NAFTA, have on trade flows. Most of
the increase in members agricultural trade, which was only recently brought under the purview
of the World Trade Organization, was due to very high trade barriers before NAFTA or other
regional trade agreements.

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Mobility of persons
According to the Department of Homeland Security Yearbook of Immigration Statistics, during
fiscal year 2006 (i.e., October 2005 through September 2006), 74,098 foreign professionals
(64,633 Canadians and 9,247 Mexicans) were admitted into the United States for temporary
employment under NAFTA (i.e., in the TN status). Additionally, 17,321 of their family members
(13,136 Canadians, 2,904 Mexicans, as well as a number of third-country nationals married to
Canadians and Mexicans) entered the U.S. in the treaty national's dependent (TD) status.
[22]

Because DHS counts the number of the new I-94 arrival records filled at the border, and the

TN-1 admission is valid for one year, the number of non-immigrants in TN status present in the
U.S. at the end of the fiscal year is approximately equal to the number of admissions during the
year. (A discrepancy may be caused by some TN entrants leaving the country or changing status
before their one-year admission period expired, while other immigrants admitted earlier may
change their status to TN or TD, or extend earlier granted TN status).
Canadian authorities estimated that, as of December 1, 2006, the total of 24,830 U.S. citizens and
15,219 Mexican citizens were present in Canada as "foreign workers". These numbers include
both entrants under the NAFTA agreement and those who have entered under other provisions of
the Canadian immigration law. New entries of foreign workers in 2006 were 16,841 (U.S.
citizens) and 13,933 (Mexicans).

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Criticism and controversies

Canadian disputes
There is much concern in Canada over the provision that if something is sold even once as
a commodity, the government cannot stop its sale in the future. [25] This applies to the water from
Canada's lakes and rivers, fueling fears over the possible destruction of Canadian ecosystems and
water supply.
In 1999, Sun Belt Water Inc., a company out of Santa Barbara, California, filed an Arbitration
Claim under Chapter 11 of the NAFTA claiming $105 million as a result of Canada's prohibition
on the export of bulk water by marine tanker, a move that destroyed the Sun Belt business
venture. Sun Belt maintains a website where many documents concerning the Arbitration are
posted www.sunbeltwater.com. The claim sent shock waves through Canadian governments that
scrambled to update water legislation and remains unresolved.
Other fears come from the effects NAFTA has had on Canadian lawmaking. In 1996, the gasoline
additiveMMT was brought into Canada by an American company. At the time, the Canadian
federal government banned the importation of the additive. The American company brought a
claim under NAFTA Chapter 11 seeking US$201 million, and by Canadian provinces under the
Agreement on Internal Trade ("AIT"). The American company argued that their additive had not
been conclusively linked to any health dangers, and that the prohibition was damaging to their
company. Following a finding that the ban was a violation of the AIT, the Canadian federal
government repealed the ban and settled with the American company for US$13 million. Studies
by Health and Welfare Canada (now Health Canada) on the health effects of MMT in fuel found
no significant health effects associated with exposure to these exhaust emissions. Other Canadian
researchers and the U.S. Environmental Protection Agency disagree with Health Canada, and cite
studies that include possible nerve damage.

The United States and Canada had been arguing for years over the United States' decision to
impose a 27 percent duty on Canadian softwood lumber imports, until new Canadian Prime
Minister Stephen Harpercompromised with the United States and reached a settlement on July 1,
2006. The settlement has not yet been ratified by either country, in part due to domestic
opposition in Canada.
Canada had filed numerous motions to have the duty eliminated and the collected duties returned
to Canada. After the United States lost an appeal from a NAFTA panel, it responded by saying
"We are, of course, disappointed with the [NAFTA panel's] decision, but it will have no impact on

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the anti-dumping andcountervailing duty orders." (Nick Lifton, spokesman for U.S. Trade
Representative Rob Portman) On July 21, 2006, the U.S. Court of International Trade found that
imposition of the duties was contrary to U.S. law.

Canadian government challenged on change in Income trust taxation

On October 30, 2007, American citizens Marvin and Elaine Gottlieb filed a Notice of Intent to
Submit a Claim to Arbitration under NAFTA. The couple claims thousands of U.S. investors lost
a total of $5 billion dollars in the fall-out from the Conservative Government's decision the
previous year to change the tax rate on income trusts in the energy sector. On 29 April 2009, a
determination was made that this change in tax law was not expropriation.

U.S. deindustrialization
An increase in domestic manufacturing output and a proportionally greater domestic investment
in manufacturing does not necessarily mean an increase in domestic manufacturing jobs; this
increase may simply reflect greater automation and higher productivity. Although the U.S. total
civilian employment may have grown by almost 15 million in between 1993 and 2001,
manufacturing jobs only increased by 476,000 in the same time period. Furthermore from 1994 to
2007, net manufacturing employment has declined by 3,654,000, and during this period several
other free trade agreements have been concluded or expanded.

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Impact on Mexican farmers

Critics of NAFTA cite negative affects on Mexico's corn farmers

In 2000, U.S. government subsidies to the corn sector totaled $10.1 billion, a figure ten times
greater than the total Mexican agricultural budget that year.These subsidies have lead to charges
of de factodumping which jeopardizes Mexican farms and the country's food self-sufficiency.
Other studies reject NAFTA as the force responsible for depressing the incomes of poor corn
farmers, citing the trend's existence more than a decade before NAFTA's existence, an increase in
maize production after NAFTA went into effect in 1994, and the lack of a measurable impact on
the price of Mexican corn due to subsidized corn coming into Mexico from the United States,
though they agree that the abolition of U.S. agricultural subsidies would benefit Mexican
farmers.According to Graham Purchase in Anarchism and Environmental Survival, NAFTA could
cause "the destruction of the ejidos (peasant cooperative village holdings) by corporate interests,
and threatens to completely reverse the gains made by rural peoples in the Mexican Revolution."

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Certificate of Origin of NAFTA
Canada, Mexico and the United States established a uniform Certificate of Origin to
certify that goods imported into their territories qualify for the preferential tariff treatment
accorded by the NAFTA. Only importers who possess a valid Certificate of Origin may
claim preferential tariff treatment for originating goods.

Language
A uniform Certificate of Origin is used in all three countries and is printed in English,
French or Spanish. The Certificate shall be completed in the language of the country of
export or the language of the importing country, at the exporter's discretion. Importers
shall submit a translation of the Certificate to their own customs administration when
requested.

Scope
A Certificate of Origin may cover a single importation of goods or multiple importations
of identical goods. Certificates that cover multiple shipments are called blanket
certificates and may apply to goods imported within any twelve-month period specified
on the Certificate. Although a Certificate of Origin may cover goods imported over not
more than a twelve-month period, it remains valid for NAFTA preference claims made up
to four years from the date upon which it was signed.
A machine made in Canada qualifies for NAFTA tariff treatment and is exported with a
Certificate of Origin signed on January 1, 1995. The U.S. importer does not enter the
machine for consumption but instead places it in a customs bonded warehouse. He
overlooks the Certificate of Origin and fails to claim NAFTA treatment for the machine
upon entry into the warehouse. If the U.S. importer withdraws the machine from the
warehouse for consumption on January 17, 1999, he will be barred from claiming NAFTA
treatment upon withdrawal because the Certificate is over four years old and is no longer
valid.

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Completion of Certificate
The Certificate of Origin must be completed and signed by the exporter of the goods.
Where the exporter is not the producer, the exporter may complete the Certificate on the
basis of:

knowledge that the good originates;

reasonable reliance on the producer's written representation that the good
originates; or
a completed and signed Certificate of Origin for the good voluntarily provided to
the exporter by the producer.

Importers' Obligations
Importers claiming NAFTA preferential tariff treatment shall make a declaration, based
on a valid Certificate of Origin in their possession, on the import documentation. Where
no claim for preferential tariff treatment is made at the time of importation, importers
may request preferential tariff treatment no later than one year after the date on which the
good was imported, provided a Certificate of Origin for the goods is obtained.
Importers must provide the Certificate to the importing country's customs administration
upon request, and must submit a corrected declaration and pay the corresponding duties
whenever there is reason to believe that the Certificate contained inaccurate information.
The customs administration of the importing country may deny preferential tariff
treatment to the goods if the importer fails to comply with any of the customs procedures
set out in Chapter Five of the NAFTA.
Importers must maintain records pertaining to the importation for five years or such
longer period as may be specified by their country.

Exporters' and Producers' Obligations

Exporters or producers that prepare Certificates of Origin shall provide copies to their
own customs administration upon request.
Exporters or producers that provide a Certificate of Origin must maintain records
pertaining to the exportation for five years or such longer period as may be specified by
their countries.
Exporters or producers that complete a Certificate of Origin shall notify all parties to
whom the Certificate was given of any change that could affect its accuracy or validity.
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Diagramatic Records
NAFTA 2001
The most significant thing about this
2000 chart is that fact that despite lots
of encouragement from federal and
provincial governments for Canadian
exporters to seek out markets in Asia,
Europe and Latin America - we still do
more than 87% of our business with
the U.S.
Mexico - highly touted as an
opportunity for us in 2001 and beyond,
is the tiny slice of green in the chart to
the left.

xx

NAFTA 2006
In the later years of the 1990's it
appeared that NAFTA was responsible
for Canada doing more and more trade
with the U.S. - and therefore increasing
our vulnerability to swings in the U.S.
economy and reducing our business
with the ROW (rest of the world).
However, as the U.S. economy began
to slow in the "Bush" administration,
Canadian companies have sought more
business with the rest of the world,
which is reflected in an updated chart
showing Canadian exports to the U.S.

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How
NAFTA
was
in
1996?

How
NAFTA
was
in
2006?

since 2001, we have done much better diversifying away from exporting mostly to the U.S. and
are improving our exports to Asia-Pacific and Europe

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U.S. NAFTA trade deficit surging in 2003
U.S.
NAFTA
trade
deficit
surging
in
2003
Since the U.S. entered into the North American Free Trade Agreement (NAFTA) with
Mexico and Canada, the trade deficit with these countries has grown rapidly (see chart
below). U.S. firms moved plants to Mexico and Canada to take advantage of lower wages
and new rules providing unheard of levels of protection for foreign investors. The
combined U.S. trade balance with the other two NAFTA countries (the difference
between U.S. exports and imports) was a small, stable deficit prior to NAFTA. Since
NAFTA that combined deficit has grown rapidly. U.S. imports have been growing more
rapidly than exports, so the trade deficit has expanded. When the growth of this deficit
eased in 2002, some claimed that U.S. trade with China and other lower-wage countries
was displacing NAFTA trade. Contrary to this view, the U.S. NAFTA deficit has
increased 12.2% so far this year, evidence that deficits with Mexico and Canada are a
continuing drag on U.S. growth and job creation.

Exports, which expand domestic production, increase the number of U.S. industrial
jobs, while imports, which replace goods that could have been produced in the United
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States, eliminate jobs. The rise in the U.S. deficit with Canada and Mexico from 1993
to 2000 displaced production supported by 766,000 U.S. jobs. Most of those jobs
would have been high-wage positions in manufacturing industries. The sustained
growth of this deficit suggests that NAFTA continues to eliminate more jobs in the
United States, which worsens the current economic downturn.
Further study of NAFTA by researchers in Canada and Mexico has shown that
workers in all three countries have been hurt, but for different reasons. In Mexico, real
wages have fallen sharply and there has been a sharp drop in the number of people
holding regular jobs in paid positions. Many workers have been shifted into
subsistence-level work in the "informal sector," frequently unpaid work in family
retail trade or restaurant businesses. In Canada, a decade of heightened competition
with the U.S. is eroding social investment in public spending on education, health
care, unemployment compensation, and a wide range of other public services. This
experience suggests that workers have good reasons to be concerned as we enter
NAFTA's second decade.

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What Is Barack Obama's Position on Free Trade?

Overall, Obama opposes many current trade agreements, which he says are bad for the economy
because they provide perks for businesses but don't protect workers.

Obama Has Three Main Proposals:

1. Amend NAFTA - He would re-open NAFTA to beef up protection for labor and the
environment.
2. Fight for Fair Trade - He opposes pending Free Trade Agreements (FTA's) with Colombia
because it allows violence against labor leaders and South Korea because it restricts U.S.
auto imports. He also wants to pressure the World Trade Organization to enforce current
agreements and stop unfair subsidies.
3. Improve Transition Assistance - He supports Federal funding for retraining displace U.S.
workers.

How Would Obama's Free Trade Position Impact the Economy?

Putting more job protection for U.S. workers in NAFTA and other FTA's may not help American
workers because it doesn't get at the source. Job outsourcing is a result of declining U.S.
competitiveness, which is itself a result of decades of the U.S. not investing in education. This is
particularly true for high tech, engineering, and science.
Opposing FTA's for two of America's closest allies, Colombia and South Korea, may damage our
relationship with them while hurting the U.S. economy. In fact, Colombia's homicide rate against
union members, and the public as a whole, has dropped 40% since 2002 thanks to a government
protection program.

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Rejection of the South Korean FTA could cause newly-elected South Korean President Lee
Myung-bak to further lose support among a population who are already upset that he agreed to
allow U.S. beef to be imported as part of the agreement. South Koreans remember the cases of
mad cow disease found in U.S. beef four years ago.
The agreement actually levels the playing field for the auto industry. Current South Korean tariffs
of 8% would be removed, as would current U.S. tariffs, which are lower at 3.5%.
NAFTA's open new markets for businesses by removing trade barriers. For example, NAFTA
increased trade from $297 billion to $810 billion. The Peterson Institute for International
Economics estimates that ending all trade barriers would increase U.S. income by $500 billion.
Opening NAFTA to renegotiation would allow Mexico to address it complaints, including
immigration reform, U.S. farm subsidies and an unfulfilled NAFTA promise to allow Mexican
commercial trucks further into the U.S.
Free trade creates more jobs than it outsources. For example, the formation of the European
Union free trade area created 300,000900,000 net new jobs. In the U.S, 1.3 million exportrelated jobs were created between 1994 and 1998.
Increasing U.S. protectionism will further slow economic growth and cause more layoffs, not
less. If the U.S. regresses and closes its borders, other countries will do the same. This could
cause layoffs among the 12 million U.S. workers who owe their jobs to exports.

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What Free Trade Issues Is Obama Missing?
One of the key obstacles to the Doha round of the World Trade Organization agreement was U.S.
agricultural subsidies. Developing countries are afraid of low-cost, subsidized U.S. farm products
flooding their markets, essentially putting family farmers out of business. Until the U.S.
significantly reduces these subsidies, further progress on this multi-lateral trade agreement is
effectively dead in its tracks.
Contrary to popular opinion, agricultural subsidies no longer go to U.S. family farms. Instead, tax
programs that were designed to help Depression-era families keep their farms are now effectively
subsidizing huge corporations who have, in turn, put these family farms out of business.
In fact, Obama's renewed pressure on the WTO to enforce other countries' subsidies could then
bring into question the subject of U.S. agricultural subsidies - still a sore point in the international
trade community. The failure of the Doha round has led to a fresh wave of bilateral trade
agreements between China, the Middle East, Latin America and Africa. Further U.S.
protectionism at this time will only increase this activity, thus pushing the U.S. economy further
out of the trade loop, and further into economic decline.

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Conclusion
The North American Free Trade Agreement (NAFTA) will not be fully implemented.
However, it is evident that NAFTA has already proved its worth to the United States by
playing an important and vital role in increasing consumer choice, improving market
access for U.S. products, and expanding U.S. jobs supported by exports.

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Bibliography

- www.google.com

-www.wikipedia.org

-www.yahoo.com

NAFTAs OFFICIAL SITE

NAFTAS HITORY

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