NAFTA is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America.
KEY Points
- The North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America.
- NAFTA came into effect on January 1, 1994 and superseded the Canada – United States Free Trade Agreement.
- Within 10 years of the implementation of NAFTA, all U.S.-Mexico tariffs are to be eliminated except for some U.S. agricultural exports to Mexico which will be phased out within 15 years.
- Most U.S. – Canada trade was duty free before NAFTA.
- NAFTA also seeks to eliminate non-tariff trade barriers and to protect the intellectual property right of the products.
- When viewing the combined GDP of its members, as of 2010 NAFTA is the largest trade bloc in the world.
Terms
- Trade bloc: A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the participating states.
- Free trade: International trade free from government interference, especially trade free from tariffs or duties on imports.
- Tariff: A system of government-imposed duties levied on imported or exported goods; a list of such duties, or the duties themselves.
The North American Free Trade Agreement (NAFTA)
The North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of Canada, Mexico, and the United States, 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 It superseded the Canada – United States Free Trade Agreement between the U.S. and Canada.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 GDP of its members, the trade bloc is the largest in the world as of 2010. NAFTA has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). The goal of NAFTA was to eliminate barriers to trade and investment among the U.S., Canada, and Mexico.
The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariffs on more than one-half of Mexico’s exports to the U.S. and more than one-third of U.S. exports to Mexico. Within 10 years of the implementation of the agreement, all U.S.–Mexico tariffs would be eliminated except for some U.S. agricultural exports to Mexico that were to be phased out within 15 years. Most U.S.–Canada trade was already duty free. NAFTA also seeks to eliminate non-tariff trade barriers and to protect the intellectual property rightof the products.
The agreement opened the door for open trade, ending tariffs on various goods and services, and implementing equality between Canada, America, and Mexico. NAFTA has allowed agricultural goods such as eggs, corn, and meats to be tariff-free. This allowed corporations to trade freely and import and export various goods on a North American scale .
GLOSSARY
Bloc
A group of countries acting together for political or economic goals, an alliance (e.g., the eastern bloc, the western bloc, a trading bloc). a group of voters or politicians who share common goals.
Corporation
A group of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members. a group of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members.
Ending
A termination or conclusion.
Export
This term export is derived from the conceptual meaning to ship the goods and services out of the port of a country. to sell (goods) to a foreign country Any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade.
GDP
Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. Gross Domestic Product (Economics). A measure of the economic production of a particular territory in financial capital terms over a specific time period.
Goal
A desired result that one works to achieve. A result that one is attempting to achieve. a result that one is attempting to achieve.
Good
An object produced for market.
Import
Something brought in from an exterior source, especially for sale or trade. To bring (something) in from a foreign country, especially for sale or trade.
Intellectual property
Any product of someone’s intellect that has commercial value: copyrights, patents, trademarks, and trade secrets. Intellectual property (IP) is a juridical concept that refers to creations of the mind for which exclusive rights are recognized.
Investment
The expenditure of capital in expectation of deriving income or profit from its use.
Product
Any tangible or intangible good or service that is a result of a process and that is intended for delivery to a customer or end user. Anything, either tangible or intangible, offered by the firm as a solution to the needs and wants of the consumer; something that is profitable or potentially profitable; goods or a service that meets the requirements of the various governing offices or society.
Right
A legal or moral entitlement.
Services
That which is produced, then traded, bought or sold, then finally consumed and consists of an action or work.