United States and the North American Free Trade Agreement (NAFTA)

On January 1, 1994, the North American Free Trade Agreement between the United States, Canada, and Mexico (NAFTA) entered into force. All remaining duties and quantitative restrictions were eliminated, as scheduled, on January 1, 2008.

NAFTA is a comprehensive trade agreement that improves virtually all aspects of
doing business between Canada, Mexico, and the United States. Upon NAFTA’s entry into force on January 1, 1994, Mexico immediately eliminated tariffs on nearly 50 percent of all industrial goods imported from the United States and removed many non-tariff barriers. Virtually all tariffs on industrial goods were eliminated by 2003 and tariffs on U.S. exports of certain agricultural products to Mexico were phased out on January 1, 2008. With the exception of tariff rate quotas on certain
supply-managed agricultural products, all Canada-U.S. trade has been duty free since 1998. Canada and Mexico are the first and second largest export markets for U.S. goods.

NAFTA created the world's largest free trade area, which now links 444 million people producing $17 trillion worth of goods and services.
Trade between the United States and its NAFTA partners has soared since the agreement entered into force.U.S. goods and services trade with NAFTA totaled $1.0 trillion in 2007 (latest data available). Exports totaled $452 billion; Imports totaled $568 billion. The U.S. goods and services trade deficit with NAFTA was $116 billion in 2007.

The United States has $967 billion in total (two ways) goods trade with NAFTA countries (Canada and Mexico) during 2008. Goods exports totaled $412 billion; Goods imports totaled $555 billion. The U.S. goods trade deficit with NAFTA was $143 billion in 2008.

Trade in services with NAFTA (exports and imports) totaled $106.8 billion in 2007 (latest data available). Services exports were $66.6 billion; Services imports were $40.2 billion. The U.S. services trade surplus with NAFTA was $26.5 billion in 2007.

Before and After NAFTA:
• Overall Trade in Goods among the United States, Canada and Mexico has grown from $297
billion in 1993 to $930 billion in 2007, an increase of 213 percent.
• U.S. goods exports to Canada and Mexico grew from $142 billion in 1993 to $385.4 billion in
2007, an increase of 171 percent.
• U.S. goods imports from Canada and Mexico grew from $151 billion in 1993 to $523.9 billion in
2007, an increase of 247 percent.

Benefits of NAFTA:
Investment: With limited exceptions, NAFTA requires U.S. investors to be treated in Mexico and Canada as well as those countries treat their own investors or investors of any other country in the establishment, acquisition, and operation of investments. NAFTA also guarantees investors the right to receive fair market value for property in the event of an expropriation. The protections of NAFTA’s investment Chapter are backed by a transparent, binding international arbitration mechanism, under which investors may, at their own initiative, bring claims against a NAFTA government for an alleged breach of the chapter. The NAFTA Parties have agreed to make public their submissions in investor-state disputes, and to make arbitral hearings open to the public. Tribunals are also authorized to accept amicus submissions from non-disputing parties.
Services: NAFTA establishes a solid framework for trade in services through the elimination of barriers in nearly all service sectors and enhancement of regulatory transparency. U.S. firms have been well positioned to take advantage of NAFTA’s new market access opportunities—services exports have more than doubled under NAFTA and greatly exceed services imports. With service industries often highly regulated, regulatory transparency is essential. Under NAFTA, regulatory authorities are to use open and transparent administrative procedures, consult with interested parties, and publish all regulations.
Government Procurement: The government procurement provisions of NAFTA apply to the procurement of goods, services, and construction services. U.S. suppliers are granted nondiscriminatory rights to bid on contracts to supply most Canadian and Mexican central government entities. This increases opportunities for U.S. exports to Canada and Mexico in such sectors as construction, environmental and computer software and design services, oil and gas field equipment and services, heavy electrical equipment, communications and computer systems, electronic, pharmaceutical products, and medical equipment.
IPR: NAFTA recognized early the importance of intellectual property protection and enforcement within the context of international trade agreements, having been signed nearly two years before the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). NAFTA provides for the protection and enforcement of a broad range of intellectual property rights, including patents, trademarks, copyrights and test data.