The North American Free Trade Agreement (NAFTA) became effective on January 1, 1994. It was an agreement between the United States, Canada and Mexico. NAFTA removed many trade barriers between these nations. It also created an organization for the three nations to conduct trade talks. This agreement gave the United States, Canada and Mexico the right to free trade in each other's markets. Thus, they would not be subjected to the tariffs and restrictions placed on other foreign nations. The lack of trade barriers was meant to promote all three economies to higher rates of productivity. It was also designed to increase North American trade influence against the European Union.

CS Question #1: What is NAFTA?

The three nations agreed to regulate economic, labor and business policies. This assured each nation a better quality of imported and exported products. The nations agreed to certain minimum worker safety and environmental laws. These laws guaranteed that the citizens of each member nation would benefit from any increased production. NAFTA drafted the North American Agreement on Labor. This agreement was designed to create safe working environments for all North American workers. Before the agreement, Mexico had many worker safety issues. Since the agreement, the Mexican government has increased spending on enforcement of safety laws by 250 percent. Worker injuries in Mexico have dropped to almost one third of the pre-NAFTA rate. Tariffs were also lowered. Before NAFTA, the Mexican tariff on imported U.S. goods was almost 10 percent. Now it has dropped to only 3 percent. Lower tariffs on American goods create lower prices for Mexican consumers. These lower prices increase the demand for U.S. goods and services. This increase in demand results in greater sales and profits for U.S. producers.

CS Question #2: What were some of the changes NAFTA created?

Before the passage of NAFTA, there was a great deal of debate. Many people supported NAFTA. They believed that removing trade barriers within North America would benefit the U.S. economy. First, the amount of exports would increase, leading to an increase in profits for U.S. producers. In addition, many believed that the European Union (EU) weakened the U.S. trade position in the world market. The EU was a group of European countries that formed a trade bloc. In other words, they developed an agreement among the European member nations. This agreement was similar to NAFTA since it reduced trade barriers between the European nations. Supporters of NAFTA believed that the agreement would allow North American nations to remain competitive in the world market.

However, NAFTA also had its opponents. Many U.S. citizens worried about the impact on the U.S. economy of lowering trade barriers. Most labor unions opposed NAFTA. They believed that the United States would lose production jobs to Mexico, where labor was less expensive. Others worried about losing national sovereignty. They feared NAFTA regulations might override U.S. laws. In the end, the agreement was signed and many U.S. citizens waited to see how NAFTA would affect the future of the U.S. economy.

CS Question #3: What were the concerns about the effects of NAFTA on the economy and laws of the United States?

It has been difficult to judge NAFTA's effect on the economies of the three nations. The U.S. and Mexican economies have changed since the agreement. However, other factors besides NAFTA have affected these economies. Canada's economy remains relatively unchanged. The Mexican economy suffered severe problems after NAFTA. Much of this was related to problems with the Mexican currency and government instability. Over 232,000 American jobs have been lost since NAFTA. Many companies are moving their production to Mexico, where the labor is less expensive. However, these companies are also creating technology and management jobs for U.S. workers. In the United States, the job losses are also related to another factor. The labor market has changed from production jobs to information-based or service jobs. The U.S. has seen a huge economic boom related to technology. In the past, most Americans had production jobs in factories. In the future, most U.S. workers will work in offices, performing technology- and service-related jobs.

CS Question #4: How has the economy of the United States changed over the past few years?

Further Thought:

1. How could international trade agreements affect a nation's sovereignty?
2. Why are U.S. labor unions worried about losing production jobs to Mexico?
3. Mexican environmental laws are still very limited. Most Mexican factories produce more pollution than U.S. factories do. The United States is allowing Mexican products, which are not produced according to U.S. environmental standards, to be imported. Do you think that Mexico will raise its standards? Do you think that the United States should lower its standards?