The North American Free Trade Agreement (NAFTA) was signed by United State, Canada and Mexico in order to promote trade between these countries. The agreement eliminated numerous tariffs related to textiles, agriculture and automobiles came into force on 1st January 1994.
NAFTA was formed because one fourth of United State of America imports such as machinery, crude oil, vehicles, gold, livestock, processed foods and fresh produce originated from Mexico and Canada which are US 3RD and 2nd biggest supplier of imported goods. In addition about 1/3 of US exports such as mineral fuel, mineral oil, plastics and vehicle parts are destined from Mexico and Canada.
The lawmaking of NAFTA was developed during the presidency of George H.W Bush. The Bill Clinton administration signed the agreement with a believe that it would generate 200,000 United State jobs within 2 years and 1 million within 5 years because exports plays an imperative role in U.S economic development. The government projected an intense increase in United State imports from Mexico as a result of lower tariffs.
NAFTA was accompanied by two other agreements; the North American Agreement on Labor Cooperation and the North American Agreement on Environmental Cooperation. These arrangements were planned to stop industries from moving to other countries to exploit lesser wages, more compassionate worker health and safety regulations and looser environmental regulations.
NAFTA greatly impact the participant countries, the United State, Mexico and Canada experienced higher wages, economic growth and increased trade since its implementations. The consequences are hard to isolate. In the beginning the critics of NAFTA were worried that it would result in US jobs relocating to Canada and Mexico. Because of free trade agreement, many companies relocated their manufacturing department to other countries with lower labor cost, however NAFTA was not the reason for those moves. The US president Donald Trump also address these concerns.
President Donald Trump campaigned on an assurance to revoke NAFTA and other trade agreements he believed bigoted to United State of America. On 27th August 2018, Donald Trump declared a new trade agreement with Mexico to replace NAFTA. It was called as the U.S – Mexico Trade Agreement to continue duty free entree for agronomic goods on both sides of the border and abolish non tariffs barriers.
On 30th September 2018, the Canada and United State agreed to replace NAFTA with new trade agreement called The United State – Mexico – Canada Agreement (USMCA). In join press release from Canada Trade Office and United State, the representative said the following:
“The United State Mexico Canada Agreement (USMCA) will give our farmers, workers, businesses and ranchers an extraordinary regular trade agreement that will result in strong economic growth and fairer trade in region. It will create high paying jobs, support middle class and create new openings for approximately half billion people. The President Donald Trump signed the USMCA Agreement on 29th January 2020.