What 3 countries make up NAFTA?

The North American Free Trade Agreement, or NAFTA, is an agreement that was signed on January 1, 1994. Under this agreement, three nations have removed trade barriers and eliminated tariffs. The three nations that have signed this treaty are the United States, Mexico, and Canada. With a combined domestic product of $20 trillion, this is the largest free trade agreement in the world.

In recent years, the benefits and drawbacks of this trade agreement have come to light. This agreement keeps grocery prices lower in the United States because of its tariff-free imports from Mexico. Imported oil also keeps gas prices in the U.S. down. Trade and economic growth have also increased as a result of the treaty.

On the downside, many manufacturing jobs from the U.S. were sent to Mexico. American workers that kept these industry jobs faced reduced wages, while many workers in Mexico have been exploited.

In September 2018, NAFTA has been renegotiated. This new treaty – known as the United States-Mexico-Canada Agreement – still needs to be ratified for by every nation and will not go into effect for several more years.

Under NAFTA, tariffs on imports and exports have been eliminated for products that are made in one of the three nations. NAFTA also grants most-favored-nation status, which means that all parties must receive equal treatment, including in foreign direct investment. NAFTA also outlines the procedures required to resolve trade disputes. The agreement also allows for easy access for business travelers traveling throughout the three nations.

NAFTA was the world’s largest free trade agreement when it was established on January 1, 1994, among Canada, the United States, and Mexico. NAFTA was the first time two developed nations signed a trade agreement with an emerging market country. 

Through NAFTA, the three signatories agreed to remove trade barriers between them. By eliminating tariffs, NAFTA increased investment opportunities. 

NAFTA accomplished six distinct things for the participating countries. First, NAFTA granted most-favored-nation status to all co-signers. That meant each country treated the other two fairly and couldn't give better treatment to domestic investors than to foreign ones. They also couldn't offer a better deal to investors from non-NAFTA countries and had to offer federal contracts to businesses in all three NAFTA countries. 

Second, NAFTA eliminated many tariffs on imports and exports among the three countries. Tariffs are taxes that are used to make foreign goods more expensive. NAFTA created specific rules to regulate trade in farm products, automobiles, and clothing, for example.

Third, exporters were required to get certificates of origin to waive tariffs. That meant an export had to originate in the United States, Canada, or Mexico. A product made in Peru but shipped from Mexico would still pay a duty when it entered the United States or Canada. 

Fourth, NAFTA established procedures to resolve trade disputes. Parties would start with a formal discussion, followed by a discussion at a Free Trade Commission (FTC) meeting if needed. If the disagreement wasn't resolved, a panel reviewed the dispute.

The trade dispute resolution process helped all parties avoid costly lawsuits in local courts and helped them interpret NAFTA’s complex rules and procedures. These trade-dispute protections applied to investors as well. 

Fifth, all three NAFTA countries were required to respect patents, trademarks, and copyrights. At the same time, the agreement ensured that these intellectual property rights didn't interfere with trade.

Sixth, the agreement allowed business travelers easy access throughout all three countries. 

Pros

• Lower grocery prices

• Lower gas prices

• Increased trade and growth

Cons

• Fewer manufacturing jobs

• Lower wages

• Worker exploitation in Mexico

• Lower grocery prices: U.S. grocery prices were lower due to tariff-free imports from Mexico.
• Lower gas prices: Imported oil from both Canada and Mexico prevented higher gas prices.
• Increased trade and growth: Easing tariff restrictions and lower prices on many goods led to increased trade and economic growth for all three countries. 

NAFTA increased the competitiveness of these three countries in the global marketplace. It allowed them to compete better with China and the European Union. By per capita GDP on a purchasing power parity basis, China is now the world's largest economy, having surpassed the United States in 2014.

• Fewer manufacturing jobs: Some argue that NAFTA had the effect of sending many U.S. manufacturing jobs to lower-cost Mexico.
• Lower wages: U.S. workers who kept jobs in those industries had to accept lower wages.
• Worker exploitation in Mexico: Mexico's workers suffered terrible labor conditions in its maquiladora programs. A maquiladora is a low-cost, U.S.-owned manufacturing operation or factory operating in Mexico, typically near the Mexico-U.S. border.

It took three U.S. presidents to put NAFTA together. President Ronald Reagan kicked it off during his 1979 announcement of his bid for the presidency. He wanted to unify the North American market to compete more effectively.

In 1984, Congress passed the Trade and Tariff Act, which gave the president fast-track authority to negotiate free trade agreements. It permitted Congress only the ability to approve or disapprove, and it couldn't change negotiating points.

In 1992, President George H.W. Bush signed NAFTA shortly before he left office. It then went back to the legislatures of all three countries for ratification. In 1993, President Bill Clinton signed it. NAFTA went into effect on January 1, 1994. 

On November 30, 2018, the United States, Mexico, and Canada renegotiated NAFTA. The new deal is called the United States-Mexico-Canada Agreement (USMCA). The implementation act passed the House in December 2019 and the Senate in January 2020, and it was signed by President Trump on January 29, 2020. It was ratified in Mexico in June 2019 and in Canada in March 2020. The USMCA went into force on July 1, 2020.

Some of the key differences between NAFTA and the USMCA are:

• A requirement that 75% of auto components are made in North America, an increase from 45% under NAFTA
• A decrease in tariffs and restrictions on products that help American farmers
• Cheaper customs duties and taxes for shipping across borders

• The North American Free Trade Agreement (NAFTA) was a treaty among Canada, Mexico, and the United States that eliminated most tariffs among the countries.
• NAFTA was the world’s largest free trade agreement when it entered into force on January 1, 1994.
• In addition to eliminating tariffs, NAFTA accomplished several other things, including granting most-favored-nation status to all countries involved. 
• While NAFTA increased trade, critics argued that many U.S. manufacturing jobs moved to Mexico. 
• NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) on July 1, 2020. 

In Mexico, the changes in farming that NAFTA prompted increased the use of chemicals and fertilizers for farming, as well as deforestation so farmers could stay in business and stay competitive. These changes degraded the environment.

NAFTA was a free trade agreement between the United States, Mexico, and Canada. It was designed to increase economic growth and investment by removing barriers to trade among the three countries. The European Union (EU) is an alliance of European nations that eliminates border controls among member countries. It created a unified monetary system and allowed people and goods to move freely.