North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA), in English North American Free Trade Agreement (NAFTA) and in French Accord de libre-échange nord-américain ( ALÉNA), is a free trade zone between Canada, the United States and Mexico. The Treaty makes it possible to reduce costs to promote the exchange of goods between the three countries.

This agreement is an extension of the former Canada-United States Free Trade Agreement that was signed on October 4, 1988 to formalize the trade relationship between the two countries. In 1990, the bloc entered negotiations to be replaced by a treaty that included Mexico.

On June 10, 1990, Canada, the United States, and Mexico agreed to establish a free trade agreement. NAFTA negotiations began on February 5, 1991; On July 8, the first meeting of negotiating chiefs takes place in Washington, D.C., on behalf of Mexico, the chief negotiator was; Jaime Serra Puche, for the United States of America; Carla Hills and from Canada; Michael Wilson.

The Trade Agreement was signed by US President George H. W. Bush on December 8, 1992; by Canadian Prime Minister Brian Mulroney on December 11, 1992; and by Mexican President Carlos Salinas de Gortari, on December 14, 1992. Likewise, the three countries signed it on December 17, 1992, and it entered into force on January 1, 1994, when the procedure of ratification by the legislature of each country that signed it.

When NAFTA was signed, a 15-year term was set for the total elimination of customs barriers between the three countries. In addition, it was agreed that existing restrictions on trade in various products, including motor vehicles and parts for these, computers, textiles, and agriculture, should be removed. The treaty also protects intellectual property rights (patents, copyrights and trademarks) and highlighted the removal of investment restrictions between the three countries. Measures relating to the protection of workers and the environment were added later as a result of supplementary agreements signed in 1992.

Unlike the European Union, NAFTA does not create a set of supranational government bodies or create a body of law above each country's national laws. NAFTA is a treaty under international law. Under the laws of the United States, it is classified as an executive agreement of Congress, reflecting a peculiar sense of the term "treaty" in United States constitutional law, where it is not subject to the practices of international law or subject to the laws of other states.

There are those who argue that this agreement for regional trade in North America benefited the Mexican economy, and helped to face the competition posed by Japan and the European Union. However, others argue that Canada and Mexico became "colonies" of the US, and that NAFTA increased poverty in Mexico and exacerbated unemployment in the US. Making the dollar the only currency in commercial transactions between the NAFTA partners implied serious resistance from Mexican society and even from certain sectors of the government where there was fear of the loss of Mexican national identity. Until 2009, the integration process was completed, although Mexico is more tied to the United States than to Canada.

On September 30, 2018, it was announced that the United States, Mexico, and Canada had reached an agreement to replace NAFTA with the United States-Mexico-Canada Agreement (T -MEC or USMCA for its acronym in English). The T-MEC, signed on November 30 of that year, is the result of the renegotiation of NAFTA that the member states carried out between 2017 and 2018, although NAFTA will remain in force until its members ratify it.

Objectives

The objectives of the treaty are:

(a) Eliminate and overcome obstacles to trade and facilitate the trilateral circulation of goods and services between the territories of the parties.

(b) Promote loyal competition conditions in the free trade zone.

(c) Increase substantially investment activities in the territories of the parties.

(d) Protect and assert, in an appropriate and effective manner, intellectual property rights in the territory of each party.

The treaty established a series of trinational-type institutions to administer and oversee the proper implementation of the provisions of the treaty. These include:

The Free Trade Commission; A NAFTA Coordinators Group; NAFTA working groups and committees; A NAFTA Secretariat; A Commission for Labor Cooperation; and a Commission for Environmental Cooperation.

Make everyone part of the same treaty.

Tariff relief

With respect to achieving the NAFTA objective of eliminating barriers to trade and investment between the US, Canada, and Mexico, in the implementation of NAFTA as of January 1, 1994, it established five stages of tariff relief.

• First Customs tariffs on goods falling under the category of degravation A fractions in a Party ' s degravation list shall be completely eliminated and such goods shall be free of customs duty from 1 January 1994;
• Second Customs tariffs on goods covered by the degravation category B fractions in a Party ' s degravation list shall be eliminated in 5 equal annual stages beginning on 1 January 1994, and such goods shall be free from customs duty beginning on 1 January 1998;
• Third Customs tariffs on goods covered by the degravation category c fractions in a Party ' s degravation list shall be eliminated in 10 equal annual stages from 1 January 1994 and shall be free from customs duty from 1 January 2003;
• Fourth Customs tariffs on goods covered by the C+ degravation category fractions in a Party ' s degravation list shall be eliminated in 15 equal annual stages from 1 January 1994, and such goods shall be duty-free from 1 January 2008;
• Fifth Customs tariffs on goods covered by category of degravation D fractions on a Party ' s degravation list will continue to receive tax-free and legislative-owned treatment and prevent conflicts between the countries of the United States. USA, Canada and Mexico.^{[chuckles]required]}

Analysis

NAFTA has been under debate since its implementation in 1994. On the one hand, there are a number of social organizations and individuals who have disagreed on the grounds that the Agreement has dismantled the national industry and has brought many problems to Mexico for being a non-Anglo-Saxon country, for example, the president of the United States Donald Trump has shown his disagreement with the Treaty, but at the same time, a series of business organizations have defended it.^{[citation required]}

• Mexico benefits from US investments, and there are two positions as to whether Mexico's participation in the Treaty is largely or only marginal. The Treaty also allows the export of the United States to Mexico of retired cars, allowing many Mexicans to have their own car.

• The United States imports energy from both countries and, moreover, membership of the group makes it easier for them to enter their products into these markets.

For Mexico, the Treaty allows the industry that is reconfigured to meet the needs of the United States market to have access to modern technologies, which allows it to increase its productivity. However, those companies established in Mexico that are not figured to serve the United States market are at a disadvantage, since they do not have the necessary technology to be competitive against North American companies whose human capital and recurrent use of state-of-the-art technology reduce costs. and increases productivity.^{[citation needed]}

In the framework of NAFTA, the increase in Mexican exports was less than that of its imports, made up of 70% intermediate goods; GDP per capita grew by just 1.7% on average between 1994 and 2000; average real remuneration fell by 2.6%; inequalities in income distribution increased considerably. Mexico is the second market for US exports (15.7% of the total) and its second source of imports (13.4% of the total). The interest in Mexico is justified because the United States expects an increase in its oil imports in the coming years and Mexico is one of the main oil exporting countries outside of OPEC. The oil and natural gas that are exploited on the Gulf Coast constitute the main source of income for Mexico, with oil alone representing 32% of the total resources. More than half of the production comes from the marine deposits of the Gulf of Mexico. The reserves found are estimated at approximately 8,000 million tons. The Agreement allows producers or associations of producers to have the right to point out cases of dumping. And apply antidumping measures, denounce subsidies, if it is shown that the neighboring country uses them, apply countervailing duties, or denounce any other damage.^{[citation required]}

In the case of Mexico, the national poverty rate was higher in 2018 than in 1994. During this period, Mexico ranked 15th out of 20 Latin American countries in terms of GDP per capita growth. Nearly five million farmers have lost their jobs, unable to compete with subsidized US corn. This disruption contributed to a sharp increase in emigration to the United States between 1994 and 2000.

Results

Since its implementation in 1994, NAFTA has been at the center of controversy. Its critics point out that it affected key sectors of the Mexican national industry, such as agriculture, because it generated an increase in the entry of US agricultural products into the national market that competed with national products. As well as the massive loss of jobs generated in the maquiladora sector in the US, due to the fact that many companies now prefer to install their assembly plants attracted by cheap labor and geographical proximity. And such factories make huge profits from these advantages.

The Treaty, due to its magnitude, has generated benefits for the countries but also economic damage in some sectors. According to different analyzes, the level of extreme poverty in Mexico rose rapidly since the implementation of the agreement in 1994, going from 16% to 28% only in the first five years. Five million peasants abandoned their land, raising urban unemployment in Mexico and increasing the migration of peasants to the US, generating political pressure on the US government and much criticism of the Mexican government.

The increase in migratory flows responds to various causes, one of which is that Mexico has had problems for economic growth to be maintained and this, in turn, has not allowed the conditions for the generation of formal jobs to arise.; which leads to an increase in the number of people engaged in informal employment. Thus, the difference in wages in Mexico compared to those in the US becomes greater and the interest of Mexicans in going to work in the neighboring country becomes more frequent.

Another aspect of the immigration issue is that:

(...)After the signing of NAFTA, its three member States have failed to achieve regional cohesion that allows them to address socio-economic processes, including migration, despite the existence of strong economic and political interconnections. In addition, no progress has been made in institutionalizing the trilateral relationship due to different factors, ranging from disinterest by rulers [,] to opposition of internal forces (political groups or trade unions, to citing some)(...)

With the signing of NAFTA, Mexico considerably increased its exports, mainly to the United States. There was an increase from 31.1 to 94.6 million dollars only in the period from 1991 to 1998, becoming the second commercial partner of the American Union. According to the World Bank, Mexico's exports between 1994 and 2003 would have been 25% lower without the treaty. However, this caused increased commercial dependence on a single destination.

The treaty has not achieved dynamic growth in the Mexican economy, but it has made Mexico more dependent on the US economy, before and after the processes of signing NAFTA, FDI flows [Foreign Direct Investment] to Mexico came and comes mainly from the United States, 61.5% of the total FDI in the period 1980-1993, and 51.6% of the total for the period 1994-2012 (...), although the origin was diversified investment, the country continues to be dependent on what happens with the US economy.

Another problem that arises with Foreign Direct Investment is that it widens the inequality between the federal entities. The most important investments are made where there is a greater productive infrastructure, since companies require efficient communication routes, so that there is rapid mobility and that their merchandise circulates. Example: Mexico City, Nuevo León, State of Mexico and Chihuahua. On the other hand, the states that have received the least FDI are: Chiapas, Tlaxcala, Zacatecas, Oaxaca, etc., which are the least developed infrastructures.

In Mexico, the sector of the productive apparatus that has benefited has been very limited and corresponds to the one that is linked to "innovation and technological modernization, while the other part, which is the vast majority of economic units, have low productivity and low capacity to absorb technological change."

Before the Treaty, Mexico supported exports in the field of oil. Subsequently, with economic liberalization, exports were no longer expressly oil, but also manufactured products such as: car parts, computers, electrical equipment, among others. However, the problem was that development did not encompass all productive activities in Mexico. Yes, there were sectors with a greater presence in international markets, but others withdrew.

It was assumed that by opening up to foreign direct investment and expanding exports, Mexico would generate such economic dynamism that it would make it possible to reduce the difference between Mexican and US GDP per capita. However, the opposite occurred.

Regarding the legal field:

(…) The clause or principle that becomes the norm of national treatment of NAFTA, together with the ordinary provisions established in Mexico, broke and continue to break with the constitutional order, since it is the Constitution that has been adapted to the Treaty, and not to the Constitution, as the official voices of the moment 1992-1994 propagated (...)

The President of the United States for the Republican Party, Donald Trump, announced during the electoral campaign that he would seek to renegotiate the free trade agreement with the government of Mexico and that if an agreement is not satisfactory for the interests of the country, his government could withdraw from NAFTA.

Mexico has also warned that it could leave NAFTA, if it fails to reap greater benefits from the renegotiation, in response to President Donald Trump, who would soon begin the NAFTA renegotiation with Canada and Mexico. President Enrique Peña Nieto announced a commercial diversification plan with other countries, which includes negotiating bilateral pacts with other countries in the world. In September 2018, it was announced that the United States, Mexico, and Canada had reached an agreement to replace NAFTA with the United States-Mexico-Canada Treaty (T-MEC or USMCA for its acronym in English)