NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

1) 2) 3) 4)

PRESENTED BY: Sumit Dev Anil Visave Nihar Manjrekar - 93 Kapil Thakkar -

INTRODUCTION
NAFTA is an agreement signed by the governments of the United states, Canada and Mexico creating a trilateral trade bloc in North America.
Members: Canada,

Mexico & United States Secretariats: Mexico city, Ottawa, Washington D.C. Establishment: 1 January 1994 GDP of NAFTA alliance: USD 12 trillion NAFTA supplements: NAAEC & NAALC

BACKGROUND
In 1988 Canada & the United States signed the CanadaUnited states Free Trade Agreement The American government then entered into negotiations with the Mexican government for a similar treaty Canada asked to join the negotiations in order to preserve its perceived gains under the 1988 deal

The agreement NAFTA was signed by U.S. president George H. W. Bush, Canadian prime minister - Brian Mulroney and Mexican president - Carlos Salinas in San Antanio, Texas on December 17, 1992.

OBJECTIVES OF NAFTA

To eliminate trade barriers & facilitate the cross-border movements of goods and services between the parties

To promote conditions of fair competition

To substantially increase investment opportunities

To provide adequate and effective protection & enforcement of intellectual property rights in each territory
To create effective procedures for the implementation and application of this agreement ,for its joint administration & for resolution of disputes To establish a framework for further trilateral, regional and multilateral co-operation to expand and enhance benefits of this agreement

NAFTA has two supplements

North American Agreement on Environmental Cooperation (NAAEC)

North American Agreement on Labor Cooperation (NAALC)

North American Agreement on Environmental Co-operation (NAAEC)

NAAEC created Commission for Environmental Co-operation (CEC) on 1st January, 1994

Objectives Foster the protection and improvement of the environment in the territories of the Parties for the well-being of present and future generations

Promote sustainable development based on cooperation and mutually supportive environmental and economic policies; Increase cooperation between the members to better conserve, protect, and enhance the environment, including wild flora and fauna;

Support the environmental goals and objectives of the NAFTA;

Avoid creating trade distortions or new trade barriers; Promote pollution prevention policies and practices

North American Agreement on Labor Co-operation (NAALC)

NAALC members work together to protect, enhance and enforce the basic rights of workers. Establishment of institutions & creation of formal process to raise concerns related to labor law enforcement directly with government

Undertaken a wide range of co-operative programs and technical exchanges on 1) Industrial relations, 2) Occupational safety and health, 3) Child labor, 4) Gender equality, 5) Protection of migrant workers

Trade and investment effects

NAFTA is a broad agreement, but improved market access, including tariff reductions on merchandise trade, was the major U.S. goal. After ten years, most tariffs have gone to zero, except for some very sensitive (mostly agricultural) goods that have limited protection for up to 15 years. Clearly, U.S.-Mexico trade and investment have grown sharply over the past decade. From 1994 to 2003, U.S. exports to Mexico rose 91%, compared to 41% to the world. U.S. imports increased by 179%, compared to 89% from the world.

NAFTA - PROS

Benefits the importers by reduced or duty free goods. Increase in trade Real GDP growth Great increase in agriculture trade among the three countries and market access within each country also increased considerably. Mexicos poverty rate decreased and real income increased, even after economic crisis 1994-1995 Intangible Benefits Environmental Provisions (NAAEC)

NAFTA - CONS
Fuel

for peso crisis (1995)

Benefits
U.S. Loss

Mexico more than the U.S.

deficit with trading partners of low-wage American jobs to Mexico problems

Environmental Traffic

congestion and delays along the borders dependency on U.S. imports

Mexicos

Impact of NAFTA on US
Agriculture exports blossomed Manufacturing sector production increased Textiles and Apparel trade increased Generated more employment

Impact of NAFTA on Canada

U.S. investment in automotive production Increases in oil exports Increases in shipment of beef, agricultural, wood and paper products to the U.S Export of mineral and mining products to US and Mexico. Rise in service export

Impact of NAFTA on Mexico

Huge FDI in Mexico by US Maquiladoras industry Rapid structural reforms Economic and political stabilization Higher regulatory standards

Effect On GDP
GDP Growth Rates NAFTA members
8 6 4 2 % 0 1990 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 CAN USA MEX

-2
-4 -6 -8

World
5 4 3

2
1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -1 -2 -3 World

Limitations of NAFTA

It has negative impacts on farmers in Mexico who saw food prices fall based on cheap imports from U.S. agribusiness It has 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

PUBLIC OPINION

Public opinion toward NAFTA in the United States, Canada, and Mexico was mixed. A survey conducted by CIDE and COMEXI in Mexico showed that 64 percent of the Mexican public favored NAFTA. The Program on International Policy Attitudes reported in a poll that 47 percent of Americans thought that NAFTA has been good for the United States, while 39 percent thought it had been bad for the country

CONTRIBUTION TO NAFTA
MEMBER COUNTRY CONTRIBUTION / SUPPLY Technology, Services, and data processing, medical and space research and capital

UNITED STATES

CANADA

Mineral, forest products, energy and technological expertise

Labour, Petroleum and agricultural products

MEXICO

INDIAS EXPORT TO NAFTA in 2005-2006 Total USD 18,817.71 millions

INDIAS IMPORT FROM NAFTA in 2005-2006 Total USD 10472.22 millions

INDIAS TRADE WITH NAFTA

INDIAS MAJOR EXPORTS ITEMS

INDIAS MAJOR IMPORT ITEMS

PRECIOUS STONES DIAMONDS & GOLD JEWELLARY WOVEN APPAREL KNIT APPAREL

SOPHISTICATED MACHINERY ELECTRICAL MACHINERY MEDICAL & SURGICAL EQUIPMENTS AIRCARFTS, SPACE CRAFTS PLASTIC WOOD PULP METALS

FISH & SEAFOOD IRON/STEEL PRODUCTS

ORGANIC CHEMICALS

INDIAS TRADE WITH USA

INDIAS MAJOR EXPORT ITEMS

INDIAS MAJOR IMPORT ITEMS

READYMADE GARMENTS GEMS,JEWELLARY & PRECIOUS STONES ENGINEERING GOODS IRON & STEEL ARTICLES COFFEE SPICES ORGANIC CHEMICALS

NEWSPRINT IN ROLLS OR SHEETS COPPER ORES AND CONCENTRATES PEAS DRIED AND SHELLED IRON SCRAP,POTASH, COPPER

WOOD PULP
MINERALS INDUSTRIAL CHEMICALS

INDIAS TRADE WITH CANADA

INDIAS MAJOR EXPORT ITEMS

INDIAS MAJOR IMPORT ITEMS

TRANSPORT EQUIPMENT DRUGS, PHARMACEUTICAL READYMADE GARMENTS

ARTICLES OF IRON OR STEEL IRON & STEEL PLASTIC & ARTICLES THEREOF NUCLEAR REACTOR

INORGANIC/ORGANIC CHEMICALS
MACHINERY & INSTRUMENTS ELECTRONIC GOODS DYES & INTERMEDIARIES

MEDICAL OR SURGICAL EQUIPMENTS

ORES, SLAG AND ASH

ORGANIC CHEMICALS

INDIAS TRADE WITH MEXICO

FUTURE OF NAFTA

Clearly not about cheap labor It is about integration of the North American marketplace It is about moving up the value-added chain It is about maintaining and increasing competitiveness and productivity Mexico, like the U.S., fears losing its manufacturing sector to other countries why? Over the last 5 years: Chinas exports to the U.S. grew 300% Mexicos exports to the U.S. grew 30%

CONCLUSION

NAFTA has played an important role in the overall development of the three nations - the progressive elimination of tariffs & trade barriers, - Dispute resolution - Commitment to intellectual property & environment legislation - Mutual entry into governmental bidding & the financial and other service sector But on the other hand it is also responsible for causalities like loss of jobs, migration, rising level of inequality and many others.