Change Country

International Businesses

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

Posted on June 21, 2018 by

Carlos Calderon

Carlos Calderon

Share This

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.

Share This

Carlos Calderon

International Accounting & Tax Consultant

Fluent in Spanish and dedicated to client growth, Carlos helps businesses expand to Mexico from the U.S. and abroad.

Related Insights

Transfer Pricing Basics for International Companies

The concept of transfer pricing addresses the amounts that related parties under common control charge one another for goods, services, or intellectual property. For example, the price charged by a parent company when it sells goods to its subsidiary is referred to as the transfer price. The central issue regarding transfer pricing is the tax obligation that may arise around these kinds of transactions when they cross two or more tax jurisdictions. 

by Nina Wang

Branch or Subsidiary? Using an EOR to Bridge the Gap

If your company is in the early stages of planning a global expansion, it is important to consider how entity taxation and access to workforce outside your home country can be connected when deciding how and when to execute your growth strategy. Operating in a new market directly as a foreign company or a subsidiary of a foreign company has different tax consequences and compliance costs. Using an Employer of Record (EOR) can help.

by Teresa Gordon

Why US Manufacturers Should Consider Nearshoring to Mexico

For manufacturing and distribution businesses with operations in China or other faraway locations, nearshoring to Mexico is starting to look more attractive. Learn about the top drivers of nearshoring and why many businesses are choosing Mexico.

by Carlos Calderon

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content