North American Free Trade Agreement
Encyclopedia : N : NO : NOR : North American Free Trade Agreement
- "NAFTA" is also an abbreviation for the New Zealand Australia Free Trade Agreement; see also Nafta (disambiguation).
Purpose and scope
Trade components
NAFTA called for immediately eliminating duties on half of all U.S. goods shipped to Mexico and Canada, and gradually phasing out other tariffs over a period of about 14 years. Restrictions were to be removed from many categories, including, but not limited to, motor vehicles and automotive parts, computers, textiles, and agriculture. The treaty also protected intellectual property rights (patents, copyrights, and trademarks) and outlined the removal of restrictions on investment among the three countries. Provisions regarding worker and environmental protection were added later as a result of supplemental agreements signed in 1993.This agreement was an expansion of the earlier Canada-U.S. Free Trade Agreement of 1989. Unlike the European Union, NAFTA does not create a set of supernational governmental bodies, nor does it create a body of law which is superior to national law. NAFTA is a treaty under international law. (Under United States law it is classed as a congressional-executive agreement rather than a treaty, reflecting a peculiar sense of the term "treaty" in United States constitutional law that is not followed by international law or the laws of other states.)
Supplements
Unlike other Free Trade Agreements in the world, NAFTA is more comprehensive in its scope and was complemented by the North American Agreement for Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).The NAAEC agreement was a response to environmentalists' concerns that companies would relocate to Mexico or the United States would lower its standards if the three countries did not achieve a unanimous regulation on the environment. The NAAEC, in an aim to be more than a set of environmental regulations, established the North American Commission for Environmental Cooperation (NACEC), a mechanism for addressing trade and environmental issues, the North American Development Bank (NADBank) for assisting and financing investments in pollution reduction and the Border Environmental Cooperation Commission (BECC). The NADBank and the BECC have provided economic benefits to Mexico by financing 36 projects, mostly in the water sector. By complementing NAFTA with the NAAEC, it has been labeled the "greenest" trade agreement; though, being a pioneer in this area, it was not hard for the agreement to be labeled "green".
The NAALC supplement to NAFTA aimed to create a foundation for cooperation among the three members for the resolution of labor problems, as well as to promote greater cooperation among trade unions and social organizations in order to fight for the improvement of labor conditions. Though most economist agree that it is difficult to assess the direct impact of the NAALC, it is agreed that there has been a convergence of labor standards in North America. Given its limitations, however, NAALC has not produced (and in fact was not intended to achieve) convergence in employment, productivity and salary trend in North America.
Further integration
While different groups advocate for a further integration into a North American Community, sensitive issues have hindered that process. The three countries have pursued different trade policies with non-members (for example, Mexico has signed FTAs with more than 40 countries in 12 agreements) making the possibility of creating a customs union hard to attain. Security issues and sovereignty are also a controversial topic. Nonetheless the three countries have complemented NAFTA with the Security and Prosperity Partnership of North America.History of the implementation
The agreement was initially pursued by free-trade conservative governments in the United States and Canada, led by Canadian Prime Minister Brian Mulroney, and U.S. President George H. W. Bush. There was considerable opposition on both sides of the border, but in the United States it was able to secure passage after President Bill Clinton made its passage a major legislative initiative in 1993. Vice President Al Gore attempted to build support for the bill by debating the issue with H. Ross Perot on the Larry King Live talk show. Perot was an outspoken critic of NAFTA during his 1992 presidential campaign, claiming that passage would cause a "giant sucking sound" of jobs leaving the United States for Mexico.After intense political debate and the negotiation of several side agreements, the U.S. House passed NAFTA by 234-200 (132 Republicans and 102 Democrats voting in favor) and the U.S. Senate passed it by 61-38. Some opposition persists to the present day, primarily directed towards specific clauses within the agreement.
Effects
Economics
Since NAFTA was signed, it has been difficult to analyze its macroeconomic effects due to the large number of other factors in the global economy. Various economic studies have generally indicated that rather than creating an actual increased trade, NAFTA has caused trade diversion, in which the NAFTA members now import more from each other at the expense of other countries worldwide. Some economists argue that NAFTA has increased concentration of wealth in both Mexico and the United States.
The Organization for Economic Co-operation and Development, or OECD, publishes annual economic statistics. The results of data mining research concerning NAFTA have been published on [Centrerion Canadian Politics' NAFTA pages], the data having been mined from OECD sources.
See also: Economy of Mexico
Controversy
Chapter 11
| The [Neutral point of view>neutrality] of this section is [NPOV disputedisputed]. Please see the discussion on the [link]. Chapter 11 allows corporations or individuals to sue Mexico, Canada, or the U.S. for compensation when actions taken by those governments (or by those for whom they are responsible at international law, such as provincial, state, or municipal governments) have adversely affected their investments. This chapter has been invoked in cases where governments have passed laws or regulations with intent to protect their constiuents, that also impact a corporation's bottom line. Language in the chapter defining its scope states that it cannot be used to "prevent a Party from providing a service or performing a function such as law enforcement, correctional services, income security or insurance, social security or insurance, social welfare, public education, public training, health, and child care, in a manner that is not inconsistent with this Chapter.[link]" This chapter has been criticized by groups in the U.S. (see for example [link]), Mexico (see for example [link]) and Canada (see for example [link]) for a variety of reasons, including not taking into account important social considerations, notably environmental matters. In Canada, several groups, including the Council of Canadians, challenged the constitutionality of Chapter 11. They lost at the trial level [link],and have subsequently appealed. In Methanex, a Canadian corporation, filed a US$970 million suit against the United States, claiming that a Californian ban on MTBE, a substance that had found its way into many wells in the state, was hurtful to the corporation's sales of methanol. However, the claim was rejected, and the company was ordered to pay US$3 million to the U.S. government in costs (See final Award of August 9, 2005 at[link]) In another case Metalclad, an American corporation, was awarded US$15.6 million from Mexico after a Mexican municipality refused a construction permit for the hazardous waste landfill it intended to construct in El Llano, Aguascalientes. The construction had already been approved by the federal government, and various environmental requirements imposed (see paragraph 48 of the tribunal decision). The NAFTA panel found that the municipality did not have the authority to ban construction on the basis of the alleged environmental concerns. (See final Award of September 2, 2000 at[link]) Further, it has been argued that the chapter benefits the interests of Canadian and American corporations disproportionately more than Mexican businesses, which often lack the resources to pursue a suit against the much wealthier states #redirect . It has been a longtime fear of some Canadians that this provision gives large U.S. companies too much power #redirect . There was one case where a natural gas company in Nova Scotia which pumped from Sable Island wanted to sell cheaper gas to residents in the neighboring New Brunswick (both Canadian provinces), but threats of a lawsuit over Chapter 11 stopped these plans in their tracks #redirect . Chapter 19Also contentious is NAFTA's Chapter 19, which subjects antidumping and countervailing duty determinations with binational panel review instead of or in addition to conventional judicial review. For example, in the United States, review of agency decisions imposing antidumping and countervailing duties are normally heard before the U.S. Court of International Trade, an Article III court. NAFTA parties, however, have the option of appealing the decisions to binational panels composed of five citizens from the two relevant NAFTA countries. The panelists are generally lawyers experienced in international trade law. The panel is charged with determining whether agency determinations involving antidumping and countervailing duties comport with the NAFTA country's domestic law. Chapter 19 is unique in international dispute settlement in that it applies a country's own law rather than international law.In the case of determinations involving the United States, a Chapter 19 panel is expected to examine whether the agency's determination is supported by "substantial evidence." This standard assumes significant deferrence to the domestic agency. Some of the most controversial trade disputes in recent years such as the U.S.-Canada softwood lumber dispute have been litigated before Chapter 19 panels. Decisions by Chapter 19 panels can be challenged before a NAFTA extraordinary challenge committee. However, an extraordinary challenge committee does not function as an ordinary appeal. Under the NAFTA, it will only vacate or remand a decision if the decision involves a significant and material error that threatens the integrity of the NAFTA dispute settlement system. As of January 2006, no NAFTA party has successfully challenged a Chapter 19 panel's decision before an extraordinary challenge committee. Canada
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