North American Free Trade Agreement (NAFTA), pact that calls for
the gradual removal of tariffs and other trade barriers on most goods produced
and sold in North America. NAFTA became effective in Canada, Mexico, and the
United States on January 1, 1994. NAFTA forms the world’s second largest
free-trade zone, bringing together 365 million consumers in Canada, Mexico, and
the United States in an open market. The largest free-trade zone is the
European Economic Area (which includes the members of the European Union and
the European Free Trade Association), which also became effective in 1994.
NAFTA was built upon a 1989 trade agreement between the United
States and Canada that eliminated or reduced many tariffs between the two
countries. NAFTA called for immediately eliminating duties on half of all U.S.
goods shipped to Mexico and gradually phasing out other tariffs over a period
of about 14 years. Restrictions were to be removed from many categories,
including motor vehicles and automotive parts, computers, textiles, and
agriculture. The treaty also protected intellectual property rights (patents,
copyrights, and trademarks) and outlined the removal of restrictions on
investment among the three countries. Provisions regarding worker and
environmental protection were added later as a result of supplemental
agreements signed in 1993.
In December 1992 NAFTA was signed by the leaders of the three
countries—Brian Mulroney of Canada, Carlos Salinas de Gortari of Mexico, and
George H. W. Bush of the United States. Despite approval from national leaders,
the agreement would not be made effective until the legislatures in all three
countries had also voted to accept it. In the United States, the debate over
NAFTA divided members of both the Democratic and Republican parties and ignited
fierce opposition from environmental and labor groups. Many feared that jobs
would be lost because the agreement would facilitate the movement of U.S.
production plants to Mexico, where plants could take advantage of cheaper labor
and lax enforcement of environmental and workers’ rights laws. Environmental
groups were concerned that pollution and food safety controls would be more
difficult to enforce and could be challenged and eliminated on the grounds that
they were trade barriers. In response to these concerns, two supplemental
agreements were added to the formal treaty; one addressed labor issues and the
other environmental issues. The Congress of the United States narrowly approved
NAFTA in November 1993, during the term of President Bill Clinton.
The most innovative yet controversial aspects of NAFTA are its
environmental provisions, which are included in the agreement itself as well as
in a separate Supplementary Agreement on the Environment. These provisions make
NAFTA the most environmentally conscious trade agreement ever negotiated. The
Supplementary Agreement established a Commission on Environmental Cooperation
(CEC), composed of senior environmental officials from each North American
country. All three countries are prohibited from relaxing their environmental
regulations in order to attract additional investment, and both citizens and
governments are permitted to file complaints with the commission if they
believe that a country is not enforcing its own environmental laws.
NAFTA’s environmental impact has been mixed. On the one hand the
CEC created an action plan to phase out four dangerous pollutants in North
America and established systems to improve the monitoring of various measures
of environmental quality. It has also investigated a number of complaints, but
the results have been inconclusive. There has been measurable improvement in
the enforcement of environmental laws in Mexico, but that country’s economic
problems have made it difficult for many smaller firms to improve their
environmental performance. As a result both air and water pollution remain
serious problems in Mexico. NAFTA’s most conspicuous failure has been the lack
of significant improvement in environmental conditions along the
Mexican-American border, in large measure due to the unwillingness or inability
of the American and Mexican governments to devote adequate financial resources
to address this critical challenge. On balance, American environmentalists have
been disappointed by the impact of NAFTA’s “green” provisions.
Formal negotiations to expand NAFTA to include Chile began in
1995, but the administration of President Bill Clinton was unable to conclude
them. Shortly after assuming office in January 2001, President George W. Bush
announced his support for the creation of a “Free Trade Area of the Americas”
that would include virtually all countries in the Western Hemisphere. Many
trade experts believe that such an agreement is likely to prove difficult to
negotiate.
