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"NAFTA" is also an abbreviation for the New Zealand Australia Free Trade Agreement ; see also Nafta . The North American Free Trade Agreement, known usually as '''NAFTA''', is a Free Trade agreement among Canada , the United States , and Mexico . NAFTA went into effect on January 1 , 1994 . NAFTA is also used to refer to the tripartite Trading Bloc of North America n countries. Purpose and scope Trade components NAFTA called for immediately eliminating duties on half of all U.S. goods shipped to Mexico and gradually phasing out other Tariff s over a period of about 14 years. Restrictions were to be removed from many categories, including Motor Vehicle s and automotive parts, Computer s, Textile s, 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. This agreement was an expansion of the earlier Canada-U.S. Free Trade Agreement of 1989 . Unlike the European Union , NAFTA does not create a set of supranational governmental bodies, nor does it create a body of law which is superior to national law. NAFTA is a Treaty under international law. (Under United States law it is classed as a Congressional-executive Agreement rather than a Treaty , reflecting a peculiar sense of the term "treaty" in United States constitutional law that is not followed by international law or the laws of other states.) Supplements Unlike other Free Trade Agreements in the world, NAFTA is more comprehensive in its scope and was complemented by the North American Agreement for Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). The NAAEC agreement was a response to environmentalists' concerns that companies would relocate to Mexico or the United States would lower its standards if the three countries did not achieve a unanimous regulation on the environment. The NAAEC, in an aim to be more than a set of environmental regulations, established the North American Commission for Environmental Cooperation (NACEC), a mechanism for addressing trade and environmental issues, the North American Development Bank (NADBank) for assisting and financing investments in pollution reduction and the Border Environmental Cooperation Commission (BECC). The NADBank and the BECC have provided economic benefits to Mexico by financing 36 projects, mostly in the water sector. By complementing NAFTA with the NAAEC, it has been labeled the "greenest" trade agreement; though, being a pioneer in this area, it was not hard for the agreement to be labeled "green". The NAALC supplement to NAFTA aimed to create a foundation for cooperation among the three members for the resolution of labor problems, as well as to promote greater cooperation among trade unions and social organizations in order to fight for the improvement of labor conditions. Though most economist agree that it is difficult to assess the direct impact of the NAALC, it is agreed that there has been a convergence of labor standards in North America. Given its limitations, however, NAALC has not produced (and in fact was not intended to achieve) convergence in employment, productivity and salary trend in North America. Further integration While different groups advocate for a further integration into a North American Community, sensitive issues have hindered that process. The three countries have pursued different trade policies with non-members (for example, Mexico has signed FTAs with more than 40 countries in 12 agreements) making the possibility of creating a customs union hard to attain. Security issues and sovereignty are also a controversial topic. Nonetheless the three countries have complemented NAFTA with the Security And Prosperity Partnership Of North America . History of the implementation The agreement was initially pursued by free-trade Conservative governments in the US and Canada, led by Canadian Prime Minister Brian Mulroney , and US President George H. W. Bush . There was considerable opposition on both sides of the border, but in the United States it was able to secure passage after President Bill Clinton made its passage a major legislative initiative in 1993. After intense political debate and the negotiation of several side agreements, the US House passed NAFTA by 234-200 (132 Republicans and 102 Democrats voting in favor) and the US Senate passed it by 61-38. Some opposition persists to the present day, primarily directed towards specific clauses within the agreement. The United States and Canada have been Arguing For Years over the United States' decision to impose a 27% duty on Canadian softwood lumber imports. Canada has filed numerous motions to have the duty eliminated and the collected duties returned to Canada. Canada has won every case brought before the NAFTA tribunal, the last being on March 18, 2006. The United States responded by saying "We are, of course, disappointed with the panel's decision, but it will have no impact on the anti-dumping and countervailing duty orders," (Neena Moorjani, spokeswoman for U.S. Trade Representative Rob Portman). The failure of the U.S. to adhere to the terms of the treaty has generated widespread political debate in Canada. The debate includes imposing countervailing duties on American products, and possibly shutting off all or some energy shipments, such as natural gas. Effects Economics Since NAFTA was signed, it has been difficult to analyze its Macroeconomic effects due to the large number of other factors in the global economy. Various economic studies have generally indicated that rather than creating an actual increased trade, NAFTA has caused trade diversion, in which the NAFTA members now import more from each other at the expense of other countries worldwide. Some economists argue that NAFTA has increased concentration of wealth in both Mexico and the United States. ''See also: Economy Of Mexico '' Controversy NAFTA has been controversial since it was first proposed. Transnational Corporation s have tended to support NAFTA in the belief that lower tariffs would increase their profits. Labor unions in Canada and the United States have opposed NAFTA for fear that jobs would move out of the country due to lower labor costs in Mexico. Some politicians have opposed free trade for fear that it will turn countries, such as Canada, into permanent Branch Plant economies. Farmers in Mexico have opposed and still oppose NAFTA because the heavy Agriculture Subsidies for farmers in the United States have put a great deal of downward pressure on Mexican agricultural prices, forcing many farmers out of business. Wages there have decreased by as much as 20 percent in some sectors. NAFTA's approval was quickly followed by an uprising amongst Zapatista Revolutionaries , and tension between them and the Mexican government remains a major issue. Furthermore, NAFTA was accompanied by dramatic reduction of the influence of trade unions in Mexico's urban areas. NAFTA has been accompanied by a dramatic increase of illegal immigration from Mexico to the United States; presumably, a significant fraction of these people are farmers forced off their land by bankruptcy. Opposition to NAFTA also comes from environmental, social justice, and other advocacy organizations that believe NAFTA has detrimental non-economic impacts to public health, the environment, etc. Chapter 11 Another matter that is particularly controversial is "Chapter 11", which allows corporations to sue federal governments in the NAFTA region if they feel a regulation or government decision adversely affects their investment. It is argued this provision scares the government from passing environmental regulation because of possible threats from an international business. For example Methanex , a Canadian corporation, filed a $970 million suit against the United States, claiming that a Californian ban on MTBE , a substance that had found its way into many wells in the state, was hurtful to the corporation's sales of Methanol . In another case Metalclad , an American corporation, was awarded $16.5 million from Mexico after the latter passed regulations banning the Hazardous Waste landfill it intended to construct in El Llano , Aguascalientes . Further, it has been argued that the provision benefits the interests of Canadian and American corporations disproportionately more than Mexican businesses, which often lack the resources to pursue a suit against the much wealthier states. It has been a longtime fear of some Canadians that this provision gives large US companies too much power. There was one case where a natural gas company in Nova Scotia which pumped from Sable Island wanted to sell cheaper gas to residents in the neighboring New Brunswick (both Canadian provinces), but threats of a lawsuit over Chapter 11 stopped these plans in their tracks. Chapter 19 Also contentious is NAFTA's Chapter 19, which subjects Antidumping and Countervailing Duty determinations with binational panel review instead of or in addition to conventional judicial review. For example, in the United States, review of agency decisions imposing antidumping and countervailing duties are normally heard before the U.S. Court Of International Trade , an Article III Court . NAFTA parties, however, have the option of appealing the decisions to binational panels composed of five citizens from the two relevant NAFTA countries. The panelists are generally lawyers experienced in international trade law. The panel is charged with determining whether agency determinations involving antidumping and countervailing duties comport with the NAFTA country's domestic law. Chapter 19 is unique in international dispute settlement in that it applies a country's own law rather than international law. In the case of determinations involving the United States, a Chapter 19 panel is expected to examine whether the agency's determination is supported by "substantial evidence." This standard assumes significant deferrence to the domestic agency. Some of the most controversial trade disputes in recent years such as the U.S.-Canada Softwood Lumber Dispute have been litigated before Chapter 19 panels. Decisions by Chapter 19 panels can be challenged before a NAFTA extraordinary challenge committee. However, an extraordinary challenge committee does not function as an ordinary appeal. Under the NAFTA, it will only vacate or remand a decision if the decision involves a significant and material error that threatens the integrity of the NAFTA dispute settlement system. As of January 2006, no NAFTA party has successfully challenged a Chapter 19 panel's decision before an extraordinary challenge committee. Canada There is some concern in Canada over the provision that if something is sold even once as a Commodity , the government cannot stop its sale in the future. This of course applies to the water from Canada's Great Lakes and rivers, fueling fears over the possible destruction of Canadian ecosystems and Canada's water supply. Other fears come from the effects NAFTA has had on Canadian law making. In 1996, MMT , a chemical additive that some studies had linked to nerve damage, was brought into Canada by an American company. The Canadian government banned the importation of the additive but, when sued by the American company, was forced to settle out of court. The American company argued that their additive had not been conclusively linked to any health dangers, and that the prohibition was damaging to their company. Language From the perspective of North American consumers, one of the effects of NAFTA has been the significant increase in bilingual or even trilingual labeling on products, for simultaneous distribution through retailers in Canada, the U.S., and Mexico in French , English , and Spanish . Travel and migration United States and Canada The U.S-Canadian border is controlled with checkpoints, but American and Canadian nationals are generally allowed to cross without advance arrangements, visa, or passport. Picture identification and proof of citizenship, however, is usually required. Citizens of other countries may face more stringent requirements. Over 200 million crossings are made each year. The relatively open border facilitates tourism and cross-border shopping. It has also permitted motorists and railway passengers to disregard the border and use the shortest possible route, subject to border-crossing delays and documentation. Passengers on airplanes crossing the border to optimize travel time are not subject to customs control if they do not land. The U.S.-Canadian border is one of the longest demilitarized international borders in the world, but others allow greater Freedom Of Movement . For example, the Schengen Agreement has resulted in the removal of border checkpoints between many countries in the European Union . This freedom of mobility has had important qualifications, however. It can be suspended or terminated by either government at will. Passports were required during the American Civil War and the Second World War . Security was increased after September 11, 2001. Canadians with very minor criminal records are banned from entering the United States, even for a few hours. More importantly, while migrants once crossed the border with ease, nationals seeking to live and work in the other country have faced an increasing range of legal restrictions over the course of the twentieth century. These restrictions were unaffected by the 1988 Free Trade Agreement and the 1993 NAFTA agreement gave mobility rights to only a small group of professionals. As well, the border has been tightened in recent decades in response to concerns about drugs and then terrorism. Recently, the US has debated imposing a visa requirement for Canadians. Mexican-American In year 2000, Vicente Fox advocated the idea of free flow of people across the US-Mexico border as a second phase of NAFTA, which would be completed in ten years. On September 6, 2001, Fox and Bush met as newly elected presidents and agreed to work "matching willing workers with willing employers" and "ensuring migration takes place through safe and legal channels, but the events of September 11 stopped the negotiations and shifted the debate in the United States towards a migration policy where security is the main goal. Comparison with other regional blocs See also
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