NAFTA

North American Free Trade Agreement

Joel Mosher
Gary Williams
Michael Hatch
 What is NAFTA?
 Agreement between Canada, Mexico, and the
United States

 Largest trade bloc in the world

 NAFTA has two main supplements

◦ North American Agreement on Environmental
Cooperation (NAAEC)
◦ North American Agreement on Labor Cooperation
(NAALC)
 NAFTA’s Origin
 Canada – U.S. Free Trade Agreement
(1988)

 Began negotiations with Mexico soon after

 World climate at the time encouraged

large, expanding trade blocs
 The United States, Mexico, and Canada
“ceremonially” signed NAFTA on Dec. 17th 1992
 George H. W. Bush was unable to finish NAFTA
and passed it to Bill Clinton
 Clinton added several clauses
 House of Representatives approved in November
1993 (234 – 200)
 Senate approved soon after (61 – 38)
 President Clinton signed it into law on December
8th 1993
 NAFTA went into effect on January 1st, 1994
 What are the basic goals of
NAFTA?

 Eliminate trade and investment barriers

 Create an expanded safe market in N.A.

 Establish trade rules

 Develop and expand world trade

 Improve working conditions in N.A.

 Why should you care?

 Average American consumers are affected

by international trade everyday

 Without “free” or “open” trade, product

costs will often be more expensive

 Possibleemployment issues that are

linked by some to NAFTA
Su NA
pe F T
rh A
i gh
wa
y
NAFTA’s EFFECT ON
THE AUTOMOBILE
INDUSTRY
 UNITED STATES
 NAFTA was envisioned with the end goal for the U.S. of being
used as a catalyst to allow the U.S. to export automobiles to
Mexico and Canada

 Reality is that NAFTA achieved the opposite effect for the

U.S. Automobile Industry

 Many manufacturers of components used in the final

assembly of automobiles were destroyed by an influx of
lower priced materials coming from other nations that
benefited from NAFTA much more than the U.S.
 MEXICO

 A positive overall impact on the Mexican auto industry

One of NAFTA’s most important effects on the Mexican auto

industry: maintaining high levels of investment

NAFTA had a buffer effect on Mexico’s auto production

 CANADA
BENEFITS:

Increases in oil exports to the U.S.

U.S. investment in automotive production

Increases in shipments of agricultural, beef, wood and

paper products to the U.S.

Export of mineral and mining products, which have

fared well in U.S. markets
Canada and the U.S. serve as the largest market for each
other's goods

The U.S.-Canada Free Trade Agreement went into effect

in 1989

NAFTA superseded the FTA

Almost one-third of U.S.-Canadian trade is in the

automotive sector
SOURCES
SOURCES
 Klier, T. (2005). Determinants of Supplier Plant Location: Evidence from the Auto Industry. 2+.

 Studer, I., Notes on NAFTA and the Auto Industry,

http://wehner.tamu.edu/mgmt.www/NAFTA/spring99/itam_auto.htm

 Barufaldi, D., NAFTA's Winners and Losers,

http://www.investopedia.com/articles/economics/08/north-american-free-trade-agreement.asp

 U.S. Department of State

http://www.umsl.edu/services/govdocs/backgroundnotes/57.htm