Free Trade Agreement with Canada and Us
Many critics of NAFTA saw the deal as a radical experiment by influential multinationals who wanted to increase their profits at the expense of ordinary citizens of the countries concerned. Opposition groups argued that the general rules imposed by NAFTA could undermine local governments by preventing them from passing laws or regulations to protect the public interest. Critics have also argued that the treaty would lead to a significant deterioration in environmental and health standards, promote the privatization and deregulation of important public services, and move family farmers to signatory states. Criticism of NAFTA often focuses on the U.S. trade balance with Mexico. While the United States enjoys a slight advantage in trade in services, exporting $30.8 billion in 2015 and importing $21.6 billion, its overall trade balance with the country is negative due to a gaping deficit of $58.8 billion in trade in goods in 2016. In comparison, there was a surplus of $1.7 billion in 1993 (in 1993, the deficit was $36.1 billion in 2016). A number of government studies have drawn increasing attention to the possibility of bilateral free trade negotiations: Looking Out (1975), by the Economic Council of Canada; several reports of the Standing Senate Committee on Foreign Affairs (1975, 1978 and 1982); and the 1985 report of the Macdonald Commission (formerly the Royal Commission on Canada`s Economic Union and Development Prospects), chaired by former Liberal politician Donald Stovel Macdonald. Macdonald stated that “Canadians should be prepared to take a leap of faith”[12] and pursue more open trade with the United States. Although Macdonald was a former Liberal finance minister, the Commission`s findings were adopted by Prime Minister Brian Mulroney`s Progressive Conservative Party, although he opposed a free trade initiative during the 1984 Canadian election campaign.
The stage was set for the start of free trade negotiations. [13] President Donald Trump promised during the election campaign to repeal NAFTA and other trade agreements that he considered unfair to the United States. On August 27, 2018, he announced a new trade agreement with Mexico to replace him. The U.S.-Mexico trade agreement, as it was called, would maintain duty-free access for agricultural products on both sides of the border and remove non-tariff barriers to trade, while further promoting agricultural trade between Mexico and the United States and effectively replacing NAFTA. Over the next two decades, a number of academic economists examined the implications of a free trade agreement between the two countries. Several of them – Ronald Wonnacott and Paul Wonnacott[9] and Richard G. Harris and David Cox[10] – concluded that Canada`s real GDP would be significantly increased if U.S. and Canadian tariffs and other trade barriers were removed, and that Canadian industry could therefore produce on a larger and more efficient scale. Other economists on the free trade side were John Whalley of the University of Western Ontario and Richard Lipsey of the C.D. Howe Institute. [11] NAFTA has been structured to increase cross-border trade in North America and stimulate economic growth in each party. The second parallel agreement is the North American Agreement on Environmental Cooperation (NAAA), which established the Commission for Environmental Cooperation (CEC) in 1994.
The CEC`s mission is to improve regional environmental cooperation, reduce potential trade and environmental conflicts and promote the effective enforcement of environmental law. It also facilitates cooperation and public participation in efforts to promote the conservation, protection and enhancement of the North American environment. It consists of three main components: the Council (Ministers of the Environment), the Joint Public Advisory Committee (JPAC) and the Secretariat based in Montreal. It has an annual budget of $9 million, with Canada, Mexico and the United States contributing $3 million per year, and is governed by consensus (not the majority). Mexico is the third largest trading partner of the United States and the second largest export market for U.S. products. Mexico was our third largest trading partner (after Canada and China) and our second largest export market in 2018. Reciprocal trade in goods and services totalled $678 billion, and that trade directly and indirectly supports millions of jobs in the United States.
The U.S. sold $265 billion worth of U.S. products to Mexico and $34 billion worth of services in 2018, for a total revenue of $299 billion in Mexico. Mexico is the first or second largest export destination for 27 U.S. states. From 1993 to 2015, the real gross domestic product (GDP) per capita of the United States increased by 39.3% to USD 51,638 (2010 USD). Canada`s GDP per capita increased 40.3% to $50,001 and Mexico`s GDP increased 24.1% to $9,511. In other words, Mexico`s per capita output grew more slowly than that of Canada or the United States, even though it was initially barely one-fifth of its neighbors. Normally, one would expect the growth of an emerging market economy to be higher than that of developed countries.
This classification system offers more flexibility than the four-digit structure of the CLC by implementing a six-digit hierarchical coding system and classifying all economic sectors into 20 industrial sectors. Five of these sectors are mainly those that produce goods, while the other 15 sectors are exclusively those that offer some kind of service. Each company receives a primary NAICS code indicating its primary line of business. A company receives its main code based on the definition of the code that generates most of the company`s revenue in a given location in the past year. It is difficult to find a direct link between NAFTA and general employment trends. The Economic Policy Institute, which is partly funded by the union, estimated that in 2013, 682,900 net jobs were displaced by the U.S. trade deficit with Mexico. In a 2015 report, the Congressional Research Service (CRS) said NAFTA “did not cause the huge job losses feared by critics.” On the other hand, it acknowledged that “in some sectors, trade-related effects could have been greater, particularly in sectors that were more exposed to the elimination of tariff and non-tariff barriers, such as the textile, clothing, automotive and agricultural industries”. Analyses of the free trade agreement often show that its impact on both countries depends on the difference in value between the Canadian dollar and the U.S.
dollar. In 1990-1991, the Canadian dollar appreciated sharply against the U.S. dollar, making Canadian industrial products much more expensive for Americans to buy and American industrial products much cheaper for Canadians who no longer have to pay high tariffs. The North American Free Trade Agreement (NAFTA), which entered into force in 1994 and created a free trade area for Mexico, Canada and the United States, is the most important feature of the bilateral trade relationship between the United States and Mexico. Effective January 1, 2008, all tariffs and quotas on U.S. exports to Mexico and Canada were eliminated under the North American Free Trade Agreement (NAFTA). Overall, NAFTA has not been devastating or transformative for the Canadian economy. Opponents of the 1988 Free Trade Agreement warned that Canada would become a 51st glorified state. While this has not happened, Canada has also not closed the productivity gap with the United States. The country`s GDP per hour worked accounted for 74% of US GDP in 2012, according to the OECD.
While thousands of American autoworkers undoubtedly lost their jobs as a result of NAFTA, they could have done worse without NAFTA. By integrating supply chains across North America, maintaining a significant portion of production in the U.S. has become an option for automakers. Otherwise, they might not have been able to compete with their Asian rivals, resulting in even more job departures. “Without the ability to move low-wage jobs to Mexico, we would have lost the entire industry,” Gordon Hanson, an economist at UC San Diego, told the New York Times in March 2016. .