The North American Free Trade Agreement [1] was implemented on January 1, 1994. The main objective of the agreement is to increase trade and eliminate tariffs among the three member countries -- Canada, Mexico and the United States. The agreement also promotes fair competition, territorial investment and trans-border cooperation. Although the NAFTA agreement has provided benefits to all three countries, there are still those who oppose [2] the trade agreement.
Prior to NAFTA other trade agreements have had positive and negative impacts on Canada. After Britain joined the European Union (EU) for example, it substantially reduced its imports from Canada. In general, the European Union has a tendency to trade with its own members, which reduces possible trade options [3] for Canadian goods. In contrast, the US-Canada Free Trade Agreement (US-CFTA) that was implemented on January 1, 1989 has been beneficial. Similar to NAFTA, this agreement allowed for the elimination of tariffs, quotas and non-tariff barriers to promote increased trade between the two countries over a period of ten years (each was the others largest trading partner). Canadian producers saw a magnitude ten increase in their potential market and US producers had easier access to the Canadian market. The US-CFTA was superseeded on January 1, 1994 by NAFTA, thus extending jurisdiction of the agreement to include Mexico. Canada did eliminate all tariffs as of January 1, 1998 (with the exception of management products such as poultry, dairy products, fresh fruits and vegetables, potatoes and the whole cultural sector), but non-tariff barriers at federal and provincial levels still currently remain.
The economies of Canada, Mexico and the United States have improved since NAFTA was implemented. Each country has been able to operate more freely in a larger, more integrated and efficient North American economy. As a result, the majority of Canada's trade (80%) is done with the US, as opposed to only 60% ten years ago [4]. Canada now surpasses Japan as the leading exporter of cars to the US, practically doubling its exports since 1989. With the elimination of tariffs, the US is able to move higher volumes of parts and vehicles across the Canadian and Mexican borders. This reduces manufacturers' production costs, thus giving them an advantage over foreign manufacturers. Canada is also more open to US goods and services than any other market in the world; approximately 98% of bilateral trade between the two countries passes across the border without tariffs . In addition, NAFTA has increased the number of jobs. Following a financial crisis in 1994, Mexico experienced a slow productivity growth [5], a decrease in domestic savings and an depreciated exchange rate that increased their deficit from 3% to 7% of the their GDP. After entering NAFTA in 1994, US companies established plants in Mexico, which helped stabilize the Mexican economy [6]. Mexico now has a trade surplus of $7.4 billion, up from a deficit of $18.5 billion in 1994, and the overall standard of living has improved.
Without NAFTA there are still major trading blocs [7] in the world. These include the European Union, the Middle East, Asia and the European Free Trade Association (EFTA). Of these, the European Union is NAFTA's strongest competitor with close to 350 million people, 30 million less than NAFTA. It is composed of western European countries that are grouped into blocs to decrease trade barriers among themselves. Its goal is to provide its members with free trade advantages, while limiting imports of similar goods from outside Europe. Subsequently, the EU is often referred to as 'fortress Europe'. First trade associations in Europe were established as early as 1921 when Belgium and Luxembourg created an economic union; the Netherlands joined in 1949 and the three became known as the Benelux countries. In 1957, France, Germany, Italy and the Benelux countries signed the treaty of Rome which gave birth to the European Economic Community. Since then, most other european countries -- UK, Ireland, Denmark, Greece, Spain, Portugal, Austria, Finland and Sweden have joined or are seeking membership.
In the future, there are hopes that other south and central American countries may join NAFTA. The US administration would like to extend NAFTA to include countries such as Chile, but has been stalled by Congress. Canada has taken the initiative and signed a free trade agreement with Chile, but would also like to have closer economic links with the European Union [8]. Canada supports a free-trade pact between the European Union and NAFTA and though it is not close to being implemented, it is seen by many as a good idea.
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