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1994 – North American Free Trade Agreement (NAFTA): Creating the World’s Largest Free Trade Area

Five years to the day after the Canada–United States Free Trade Agreement was implemented, an expanded free trade area was created with the implementation of the North American Free Trade Agreement (NAFTA), which includes Mexico. The NAFTA came into effect on January 1, 1994. (See 1989—Canada–United States Free Trade Agreement: Eliminating Barriers to Trade.)

NAFTA created the largest free trade area in the world, covering at the time some 360 million people and nearly C$500 billion in yearly trade and investment.

Many of the same issues raised in the CUSFTA debate surfaced again during NAFTA negotiations. Canadian businesses wanted Mexico to open up to them. Organized labour and workers feared Canadian businesses would relocate to Mexico to take advantage of lower labour costs and lower environmental standards. Canadian nationalists wanted assurances that Canadian sovereignty would be respected and that Canada could protect its culture, water resources, and standards on health, safety, labour and social programs. Some provinces worried about NAFTA’s effects on regional industries, such as British Columbia’s softwood lumber and Ontario’s car manufacturing.

NAFTA maintained the tariff elimination schedule established by the CUSFTA for the bilateral trade between the United States and Canada. Separate bilateral schedules were negotiated by both countries with Mexico for the elimination of tariffs.

The agreement also sets out rules in areas such as investment, services, intellectual property, government procurement, competition policy and temporary entry of business persons. As was the case in the CUSFTA, Canada made no commitments to liberalize trade in social services or cultural industries.

To promote the effective enforcement of each country's labour and environmental laws and regulations, separate agreements were negotiated. The North American Agreement on Labour Cooperation was designed to facilitate greater co-operation between Canada, the United States and Mexico in this area. The North American Agreement on Environmental Cooperation allows each party to choose the level of environmental protection it considers appropriate. It makes clear that each country may adopt standards more stringent than international standards, but prohibits the lowering of environmental standards to attract investment.
NAFTA has had some clear effects on Canada’s economy. Canadian product exports to both Mexico and the United States roughly doubled between 1994 and 2000, from C$1 billion to C$2 billion to Mexico, and from C$183 billion to C$359 billion to the United States. NAFTA has made Canada more attractive to foreign and domestic investors.

Links

Trade Agreements: North American Free Trade Agreement (NAFTA)
Source: Agriculture and Agri-Food Canada
http://www.agr.gc.ca/itpd-dpci/english/trade_agr/nafta.htm

The North American Free Trade Agreement
Source: International Trade Canada
http://www.international.gc.ca/nafta-alena/menu-en.asp

Trade Data Online
Source: Industry Canada
http://www.strategis.ic.gc.ca/sc_mrkti/tdst/engdoc/tr_homep.html

NAFTA Secretariat Homepage
Source: NAFTA Secretariat
http://www.nafta-sec-alena.org/

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