North American Free Trade Agreement

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The North American Free Trade Agreement, which eliminated most tariffs on trade between Mexico, Canada and the United States. NAFTA’s purpose is to encourage economic activity between North America’s three major economic powers. Numerous tariffs, particularly those related to agriculture, textiles and automobiles, were gradually phased out between Jan. 1, 1994 and Jan. 1, 2008.

The North American Free Trade Agreement (NAFTA), came into effect on January 1, 1994, creating the largest free trade region in the world, generating economic growth and helping to raise the standard of living for the people of all three member countries. By strengthening the rules and procedures governing trade and investment, the NAFTA has proved to be a solid foundation for building Canada’s prosperity and has set a valuable example of the benefits of trade liberalization for the rest of the world.

The United States commenced bilateral trade negotiations with Canada more than 30 years ago, resulting in the U.S.-Canada Free Trade Agreement, which entered into force on January 1, 1989. In 1991, bilateral talks began with Mexico, which Canada joined. The NAFTA followed, entering into force on January 1, 1994. Tariffs were eliminated progressively and all duties and quantitative restrictions, with the exception of those on a limited number of agricultural products traded with Canada, were eliminated by 2008.

President Trump campaigned on a promise to repeal NAFTA and other trade agreements he deemed unfair to the United States, and on August 27, 2018, announced a new trade deal with Mexico to replace it. The U.S. – Mexico Trade Agreement, as it is called, will maintain duty free access for agricultural goods on both sides of the border, and eliminate non-tariff barriers while encouraging more agriculture trade between Mexico and the U.S. Congress needs to vote to approve the trade agreement which would effectively replace NAFTA. Meanwhile, the U.S. and Canada continue to work on a revised trade agreement of their own.

NAFTA also includes chapters covering rules of origin, customs procedures, agriculture and sanitary and phytosanitary measures, government procurement, investment, trade in services, protection of intellectual property rights, and dispute settlement procedures. For the full NAFTA text, click here.

On May 18, 2017, following consultations with relevant Congressional committees, U.S. Trade Representative Robert Lighthizer informed Congress that the President intends to commence negotiations with Canada and Mexico with respect to the NAFTA. Through these negotiations, the United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities to trade with Canada and Mexico.

USTR recently received numerous public comments in response to a notice in the Federal Register seeking comments on negotiating objectives. To view these comments please click here. In addition, in three days of hearings from June 27-29, 2017, USTR heard directly from over 140 witnesses, who provided testimony on a wide range of sectors, from agriculture to manufacturing and digital trade, and represented industries, workers, farmers and ranchers. To review the transcripts for those hearings, please click here.

The United States, Canada and Mexico have agreed that the information exchanged in the context of the NAFTA negotiations, such as the negotiating text, proposals of each Government, accompanying explanatory material, and emails related to the substance of the negotiations, must remain confidential. Pursuant to this agreement, USTR has classified the materials. This means that they are not available under the Freedom of Information Act.  To review the confidentiality agreement, please click here

How NAFTA Affects the U.S. Economy

NAFTA increased the competitiveness of the these three countries in the global marketplace. It allows them to better compete with China and the European Union. In 2007, the EU replaced the United States as the world’s largest economy. In 2015, China replaced both.

It took three U.S. presidents to put NAFTA together. President Ronald Reagan kicked it off during his campaign in 1980. He wanted to unify the North American market to better compete with the EU. 

In 1984, Congress passed the Trade and Tariff Act. That gave the president “fast-track” authority to negotiate free trade agreements. It permits Congress only the ability to approve or disapprove. Congress can’t change negotiating points. Otherwise, countries would never concede valuable trade privileges.

In 1992, President George H.W. Bush signed NAFTA after he took office. It then went back to the legislatures of all three countries for ratification.

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