The North American Free Trade Agreement (Nafta) Promotes Open Trade Globally
Second, NAFTA eliminated many tariffs on imports and exports between the three countries. Tariffs are taxes that are used to increase the cost of foreign goods. NAFTA has developed specific rules to regulate trade in agricultural products, motor vehicles and clothing. The deal affected thousands of U.S. workers after U.S. companies relocated their production plants to Mexico to take advantage of lower wages and relax workers` health and safety rules. In addition, according to critics, the agreement has led to environmental degradation due to rapid industrialization in Mexico. Through NAFTA, the three signatories agreed to remove barriers to trade between them. By removing tariffs, NAFTA has increased investment opportunities. Supporters of the North American Free Trade Area argued that the free trade area would increase trade and production for businesses and create millions of jobs in member countries. Participating countries would also benefit from removing or removing barriers to trade between the three countries.
The pact catalyzed Mexico`s transition from one of the world`s most protectionist economies to one of the most trade-friendly. Mexico had dismantled many of its trade barriers after joining the WTO`s 1986 General Agreement on Tariffs and Trade (GATT) in 1986, but it still had an average level of tariffs before NAFTA [PDF] of 10%. Neither the worst fears of Canadian trade opponents – that open trade would erode the country`s manufacturing sector – nor the highest hopes of NAFTA proponents – that this would lead to a rapid increase in productivity – have been realized. Employment in Canada`s manufacturing sector has remained stable, but the productivity gap between the Canadian and U.S. economies has not been closed: until 2017, Canada`s labour productivity remained at 72% of the U.S. level. Fourth, NAFTA has put in place trade dispute resolution procedures. The parties would begin a formal discussion, followed by a discussion at a meeting of the Free Trade Committee, if necessary.
If the disagreement has not been resolved, a panel has considered the dispute. The trial helped all parties avoid costly prosecutions in local courts and helped them interpret THE complex NAFTA rules and procedures. These commercial disputes also applied to investors. Nevertheless, NAFTA has been a recurring objective in the broader free trade debate. President Donald J. Trump says it undermines U.S. jobs and manufacturing, and in December 2019, his administration finalized an updated version of the pact with Canada and Mexico, now known as the U.S.-Mexico-Canada Agreement (USMCA).