Report on the North American Free Trade AgreementTable of ContentsHistorical BackgroundConception and Formation of the AgreementThe Contents of the Agreement (Objectives, Terms and Implementation Schedule)Development over the yearsCurrent StatusFuture ProspectsPerformance Indicators (Quantitative and Qualitative)Works Cited1. Historical BackgroundThe North American Free Trade Agreement (NAFTA) is the trade bloc in North America consisting of the United States, Canada and Mexico which came into effect on January 1, 1994. The NAFTA has two supplementary co-operations, the North American Agreement of Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC) (Hufbauer and Schott). According to Trefler, historically, the NAFTA can be noted as an expansion of the earlier Canada-US Free Trade Agreement of which was signed on January 2, 1988.
The practice of free trade in the US has long been a controversial issue especially when it is in relation to Canada. Economic advisors have criticized Canada as trying to encourage a political “takeover” by the US when they were actually trying to forge closer economic relations. But the issue of free trade goes as far as 1855 where the Reciprocity Treaty was created to limit free trade between British colonies in North America and the US.
In 1866, the US Congress cancelled the treaty. The Liberal Party of Canada has traditionally supported free trade and in 1911, free trade became an electoral issue but over the next few decades, the issue was never resolved. From 1935 to 1980, the number of trade agreements between the US and Canada reduced the tariffs in both countries, leading to the 1960 Canada-United States Automotive Agreement (AutoPact) and by the 1980s, both the US and Canada proved to be each other’s largest trading partners.
In 1985, a Royal Commission on the economy issued a report to the Canadian government advocating free trade with the US and then US president Ronald Reagan welcomed the Canadian move and the United States Congress gave the green light for a free trade agreement to be signed with Canada. The Canada-US Free Trade Agreement included points such as the removal of most remaining tariffs, access to Canada’s energy and cultural industries as well as Canada’s protection of sectors such as education and healthcare (Hufbauer and Schott). The agreement led to a rapid increase of trade between both countries.
Canada’s Gross Domestic Product (GDP) for exports jumped from 25% to 40%. Some areas were unresolved including areas of lumber as the Canadians have blamed the US of violating the agreement via protectionist policies. Thus, to overcome these problems, the NAFTA was signed between the US and Canada and it was also expanded to include Mexico. 2. Conception and Formation of the AgreementAs noted earlier, NAFTA was pursued by governments both in the US and Canada in support of free trade.
Led by US President George H. W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas de Gortari, the three countries signed the NAFTA in December 1992 but the agreement only came into effect on January 1, 1994. There was opposition in all three countries including the US. The US House passed the NAFTA by 234-200 votes (Final Vote Results for Roll Call 575) whereas the US Senate passed it by 61-38 (U. S. Senate Roll Call Votes 103rd Congress).