The North American Free Trade Agreement significantly altered the economic relationship among businesses in the United States, Canada, and Mexico by approximating the conditions of a common market. The agreement created the largest free trade area in the world and sparked considerable controversy over exactly who benefits most from its terms.
The North American Free Trade Agreement (NAFTA) was negotiated between 1991 and 1992, with additional agreements incorporated in 1993 to shore up U.S. ratification and allow the accord to go into effect on January 1, 1994. The two supplemental agreements were the
NAFTA also increased the pressure on labor unions, particularly in the United States and
NAFTA represented the culmination of years of business lobbying efforts aimed at opening up new markets and investment opportunities. The notion of a trade agreement was generally embraced by the U.S. Republican Party and was thrown into high gear during the administration of President George H. W. Bush. Although the terms of agreement were reached in October, 1992, substantial opposition in the U.S. Congress, spearheaded by labor and environmental interests, prevented the Bush administration from achieving quick ratification. Before this tripartite agreement, a U.S.-Canada Free Trade Agreement had been finalized in 1989. The Conservative Party administration of Brian Mulroney in Canada worked closely with the Bush administration to bring NAFTA to fruition. However, stiff opposition on both sides of the border made passage in the U.S. Congress impossible until the Democratic Party regained the White House. It was ultimately the administration of President Bill Clinton that rallied sufficient bipartisan support for congressional ratification, only after two separate sidebar agreements addressing labor and environmental concerns were added to the agreement. Once ratified in Washington, NAFTA went into effect on January 1, 1994.
NAFTA was designed to create a free trade area across the three member countries by eliminating
In effect, NAFTA ratified a trend toward economic liberalization in the
The American small-business sector was especially attracted to NAFTA because it promised the possibility of an international market for products that had been limited to local and national markets. Ultimately, however, larger businesses such as agribusiness proved to be better positioned to take advantage of the opportunities posed by the expanded markets offered by this agreement. In the final analysis, NAFTA encouraged an already well-established trend, the increasing concentration of transnational capital into the hands of fewer and larger firms.
When NAFTA was still being negotiated in 1992, independent third-party presidential candidate H. Ross
Perhaps corn production best illustrates the downside of NAFTA for Mexico’s peasantry because the crop is grown on more than half of that country’s cultivable land and its production involves nearly half of the agrarian labor force. American producers are heavily subsidized by their government, as are large Mexican producers (albeit on a smaller scale), but the majority of Mexico’s
NAFTA was originally touted as a move toward regional integration of the Americas. The Bush administration argued that NAFTA was the first major step toward an eventual Free Trade Area of the Americas (FTAA) agreement that would integrate the hemisphere from Canada to the tip of South America. It is important to understand, however, that NAFTA is a trade and investment agreement. It contains none of the political institutions associated with the kind of comprehensive integration created by the European Union. The primary goal of NAFTA was to open up trade and investment markets. Many observers also point to the strategic geopolitical significance that such economic pacts hold for Washington. Clearly, however, these free trade and investment agreements never envisioned a move toward a common currency or even free mobility of labor between their member countries. Indeed, the only move toward expanding NAFTA involved various proposals over the years to increase its geographical reach by including other nation members. Eventually, separate U.S. free trade agreements were signed on a bilateral basis with Chile, Peru, and others, including a subregional trade and investment agreement signed with Central American countries and the Dominican Republic. This has left the original terms of NAFTA intact and increasingly under political fire due to persistent opposition on the part of farmers, trade unions, and environmental groups.
The proposed FTAA eventually stalled because of considerable social protests all across the hemisphere. This opposition led important regional actors such as Brazil to pull back, preventing any final agreement under the original timetable of negotiations. In the United States, the possibility of renegotiating NAFTA has steadily gained currency among major political figures, mostly in the Democratic Party. In Mexico, a broad coalition of peasant organizations and social movements as well as leftist political parties have continued to demand renegotiations on portions of NAFTA that are key for that country. Because opposition to the agreement, particularly over environmental concerns, also remains considerable in Canada, the long-term future of the agreement remains uncertain.
Belous, Richard S., and Jonathan Lemco, eds. NAFTA as a Model of Development. Washington, D.C.: National Planning Association, 1993. Collection of twenty-one conference papers presents a variety of viewpoints, including several from the perspective of Canada and Mexico. Cameron, Maxwell A., and Brian W. Tomlin. The Making of NAFTA: How the Deal Was Done. Ithaca, N.Y.: Cornell University Press, 2000. Provides some background on the diplomatic process and presents a full account of the negotiations that resulted in the agreement. Gerson, Timi, et al. Another America Is Possible: The Impact of NAFTA on the U.S. Latino Community and Lessons for Future Trade Agreements. Washington, D.C.: Labor Council for Latin American Advancement and Public Citizen’s Global Trade Watch, 2004. An examination of the adverse impact that NAFTA has had on U.S. Latino communities, particularly in the areas of job security, health, and environment. The report shows how NAFTA weakens federal, state, and local public interest laws through unrestricted empowerment of business interests. Harr, Katie. “NAFTA, CAFTA-DR, and the Role of the Environment.” COHA Opinion 6, no. 2 (2006). The incorporation of the environmental protection sidebar agreement (NAEEC) into NAFTA had great symbolic importance. This essay written for the Council on Hemispheric Affairs journal suggests, however, that loose mandates for strengthening enforcement of existing environmental laws and encouraging greater public participation in conservation and pollution control fell short of offering real environmental protections. Scott, Robert E., Carlos Salas, and Bruce Campbell. Revisiting NAFTA: Still Not Working for North America’s Workers. Washington, D.C.: Economic Policy Institute, 2006. This report details the ways in which NAFTA serves business interests in all three member countries while at the same time weakening the existing social contract and exacerbating existing social inequalities. Shefner, Jon. “Rethinking Civil Society in the Age of NAFTA: The Case of Mexico.” Annals of the American Academy of Political and Social Science 610 (2007): 182-200. This article establishes the connection of NAFTA to the broader issue of the neoliberal development model. It is particularly useful for understanding the persistence of social movement opposition to free trade agreements such as NAFTA. Solomon, Joel. Trading Away Rights: The Unfulfilled Promise of NAFTA’s Labor Side Agreement. New York: Human Rights Watch, 2001. A comprehensive and detailed analysis of the weaknesses of the sidebar agreement on labor (NAALC) that was ratified as part of NAFTA. The report shows how the NAALC avoided embracing international labor rights norms or the establishment of multinational judicial processes in favor of calling on each signatory country to enforce its existing laws.
Canadian trade with the United States
General Agreement on Tariffs and Trade
International economics and trade
Latin American trade with the United States
Mexican trade with the United States
World Trade Organization