What You Need to know about North American Free Trade Agreement (NAFTA)

Carlos Calderon

Drafted in 1992, the NAFTA document was designed to define the rules of commerce between Mexico, Canada and the United States. The main objectives were eliminating trade barriers, promoting conditions for fair competition, and increasing investment opportunities. Since NAFTA’s effective date in 1994, the increase of commerce between the three countries has boosted the economies of each nation while reducing prices for consumers; creating a free-trade zone.

For Mexico, imports, exports and foreign direct investment has been considerably enhanced during these years with the exception of the country’s agricultural sector which has not been able to compete against US imports. With this sector, costs increased as nitrogen fertilizer imports caused unintended pollution and higher costs.

During the 2016 US presidential campaign, candidate Donald Trump indicated his opposition to the free trade agreement, making this a hotbed topic for review once president. As such, President Trump and US Trade Representative Robert Lighthizer began renegotiation of NAFTA on August 16, 2017 with the expectation of a completed review by the end of that year. As that deadline came and went, the three countries are now on their 8th round of renegotiation. Stakeholders are hopeful that the talks will be complete by July 2018.

The main points under revision include:

• Automotive commerce, rules of origin
• The “Sunset” clause
• Agricultural temporality
• Tariffs on metals

With Mexico holding its presidential election in July and the US holding mid-term elections in November, parties are working to expedite the decision-making process in advance of these dates.