North American Free Trade Agreement

North American Free Trade Agreement( NAFTA )I.ScopeNAFTA Population:387 million15 Nation EU Population:373 millionNAFTA GNP: $8 trillionEUROPE GNP: $8 trillionSize of Trade Relationships:U.S./Canada:$406 billionU.S./Mexico:$248 billionCanada/Mexico:$ 20 billion

Top Ten 2000 U.S. TradingPartners ($ billions)Canada$176.4$229.2$405.6-$52.8Mexico111.7135.9247.6-24.2Japan65.3146.5211.8-81.3China16.3100.0116.3-83.8Germany29.3558.788.0-29.5United Kingdom41.543.585.0-1.9South Korea27.940.368.2-12.4Taiwan24.440.564.9-16.1France21.029.050.0-8.0Singapore17.419.637.0-2.2CountryU.S. ExportsU.S. ImportsTotalSurplus/DeficitIrwin/McGraw-Hill2-2Copyright2002 by The McGraw-Hill Companies, Inc. All rights reserved.

NAFTA

II.HistoryU.S./Canada Free Trade Agreement signed on January 2, 1988Impacts on the Agreement:Elimination of dutiesDirect investment in the other country made easierEasier to market services in the other countryProvides dispute resolution mechanismUSCFTA not without controversyUSCFTA consistent with GATT

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III.General Reasons for Free Trade Agreements- 1. Limits on GATT- 2. Allows for specialization in terms of comparative advantage- 3. Increases potential exports for all parties

IV.Enter Mexico (NAFTA)Political ChangeSkyrocketing Trade

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V.Advantages of NAFTA for MexicoIn spite of being resource rich, Mexicos population growing faster than the number of jobs. Needs investment, technology, and exports to spur the economy.

VI. Advantages of NAFTA to U.S.Access to Mexican Labor and MarketsNote: all three nations need the agreement to compete more effectively in world markets

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VII. Primary Objections to NAFTA- 1. Fears of Lost Jobs (U.S./Canada)

- 2. Exploitation of Mexican Labor

- 3. Environmental Laws

- 4. Fears of Loss of Cultural Identity (Canada/Mexico)

What NAFTA Will Do- 1. Help Open Mexican Market

- 2. Increase Trade

- 3. Lower Prices

- 4. More Competitive Industries (Globally)

What NAFTA Will Not Do

- 1. 50% N.A. Origin Needed to Qualify

- 2. Decrease Paperwork

- 3. Eliminate Technical Standards

- 4. Lead to Standardized Transportation

Classifications/Groups- Group of 7 Industrialized- NICs- LDCs

Market Characteristics- Purchasing Power Parities

Policy Toward Foreign Investment-Varies by country