The North American Free Trade Agreement


Since the birth of this great nation in 1776, the United States has
remained a dominant world power in many aspects. The American standard of living
has been the envy of the world, powered by an economy rivaled by nearly no one.
Our economy continues to be the rock with which the global economy can lean on,
as evidenced by nations that rely on huge reserves of the dollar because of its
stability as a means of settling international debts. Unfortuneatly, despite the
solidity that our economy is so often associated with, we have accumulated a 5
trillion dollar (that\'s 9 zeros) national debt. Something has to be done about
this colossal problem to ensure that the United States retains its status as a
world power in the global economy. One vital catalyst to help promote growth and
neutralize the massive account deficit and foreign debts is the North American
Free Trade Agreement. NAFTA, for short, is one positive effort that not
surprisingly, has met with the opposition of many. In light of this opposition,
it is evident that NAFTA is accomplishing its primary goals and encouraging the
growth of the American economy.
NAFTA negotiations began on June 11, 1990 when former President George
Bush and Mexican President Carlos Salinas de Gurtari met to discuss the
possibility of revising current trade policies. The thing that set the NAFTA
apart from other trade agreements historically was that it was to be the first
trade agreement entered into between two industrial countries and a developing
country. By much of the world the NAFTA is often viewed upon as North America\'s
answer to the European trading bloc. Many provisions of the NAFTA take their
roots in the Canada-U.S. Free Trade Agreement which became operational January 1,
1989. A target objective was to create free trade between the United States,
Mexico, and Canada rather than a comprehensive economic union such as that of
the European Community. Whereas the EC dealt with monetary exchange rate issues
by implementing a standard in currency called the "Euro-Currency", the NAFTA
would be off limits to such control. Like many issues today, this topic was
hotly debated. Many people vehemently argued that job loss and low wages would
plague the United States and Canada inflicting more damage on these two already
struggling economies. The pro-NAFTA big business sector reportedly coughed up
between 20 and 30 million dollars for lobbying. This seems to make sense
considering that 86% of the companies listed on Fortune magazine\'s top 500 list
has operations in Mexico. With the support of current president, Bill Clinton,
the NAFTA passed through Congress late in 1993.
The 2,000 page NAFTA plan details many things, one of the most important
clauses being the reduction of tariffs. Over the next 15 years all internal
tariffs will be reduced to zero for trade amongst the United States, Canada, and
Mexico. Tariffs on "sensitive" goods such as agricultural products that require
a longer adjustment period will remain in place for the full 15 years, while
being subjected to incremental decreases each year. All in all there are 4
tariff classes, quite cleverly lettered A, B, C, and C+, to be reduced to zero
eventually. Tariffs for the "A" class were void as of January 1, 1994. The "B"
category will diminish at a rate of 20% for five years, the "C" class at a rate
of 10% a year for 10 years, and finally the "C+" category which will stretch
tariff reductions out over the full 15 years. Other than tariffs, NAFTA also
eliminates things such as the costly need to convert drivers as merchandise
rolls over the borders of a neighboring country.
What all of this could do for the United States is quite clear. The most
important objective is to improve the efficiency and productivity of the member
countries to more effectively compete against foreign suppliers at home and
abroad. The NAFTA imparts an export-led growth strategy to help solve the United
States\' account deficits. The premise behind the whole thing is quite simple.
Once our nation experiences the expected increase in productivity, which in turn
forces prices down, exports would ultimately increase. NAFTA will undoubtedly
contribute to economic growth in Mexico, which will also increase the demand for
U.S. goods and services in our neighbor to the South. A prosperous Mexico, which
is already this country\'s third largest trading partner, would become a thriving
market for U.S. exports. Another promising goal of the NAFTA is the amount of
jobs it will create, not lose, in the American workforce.
According to the book North American