THE

NORTH
AMERICAN
FREE
TRADE
AGREEMENT ( NAFTA)

WHAT IT MEANS FOR U.S. CONSUMERS

 What is the North American Free Trade Agreement?

 In January 1994, the United States, Mexico and Canada entered into the North American Free Trade Agreement (NAFTA), creating the largest free trade area and richest market in the world. The NAFTA is the most comprehensive regional trade agreement ever negotiated by the United States and is scheduled to be fully implemented by the year 2008. In 1996, U.S. two-way trade in goods under the NAFTA with Canada and Mexico stood at $420 billion--a 44 % increase since the NAFTA was signed.

 What are some of the key goals of the NAFTA?

• to reduce barriers to trade
• to increase cooperation for improving working conditions in North America
• to create an expanded and safe market for goods and services produced in North America
• to establish clear and mutually advantageous trade rules
• to help develop and expand world trade and provide a catalyst to broader international cooperation

Why should consumers care about the NAFTA?

 U.S. consumers participate in international trade each day as they purchase goods and services that cross international borders. Therefore, they are affected daily by what they pay for the products and how safe they are.

 Trade is considered "free" or "open" when goods and services can move into markets without restrictions, and prices are determined by supply and demand. Nations sometimes erect barriers to this free movement of goods and services, such as quotas limiting the quantity of products imported, or non-tariff barriers, such as registration or labeling requirements, that create obstacles to selling foreign goods. These barriers can significantly increase the cost of the product.

  What are the benefits of the NAFTA for U.S. consumers?

• more free trade resulting in greater choices in goods and services
• lower prices and improved quality products
• stronger health and safety standards
• improved economic stability in the U.S. marketplace
• a marketplace that is increasingly driven more by supply and demand than by barriers to commerce

 What are the benefits of the NAFTA for U.S. business?

• larger North American market access
• new export and investment opportunities
• elimination of tariffs; Canadian and U.S. tariffs were eliminated on January 1, 1998; Mexico will be duty free by the year 2008 for North American made products
• creation of strong "rules of origin" for North American made products
• effective procedures to resolve trade disputes
• establishment of compatible standards of goods between the three countries
• facilitation of cross-border movement of goods and services

 What is the NAFTA's impact on U.S. jobs?

 The NAFTA has created jobs for American workers by expanding access to U.S. goods and services in the Mexican and Canadian markets. In 1996, jobs supported by the export of U.S. goods to Mexico and Canada increased by an estimated 311,000 to 2.3 million from 1993 (pre-NAFTA). In addition, export-supported jobs, which are in the higher productivity, export-oriented sectors of the economy, pay 13% to 16% more than the average U.S. wage.

 What are some of the industries that are experiencing significant benefits as a result of the NAFTA?

 Agricultural Trade: The United States is the world's largest and most competitive exporter of agricultural commodities. The NAFTA has reinforced the trend toward greater integration of the North American agricultural marketplace and a more productive and efficient American agricultural sector. U.S. consumers are benefiting from more open access to wider sources of supply. U.S. agricultural exports to North America have grown rapidly since the NAFTA went into effect, and, if recent trends continue, could reach $30 billion per year by 2005--up from $11.6 billion in 1996.

 Automotive Industry: Prior to the NAFTA, U.S. motor vehicle exports to Mexico faced restrictive trade balancing and local content requirements, as well as tariffs of 20 %. With the reduction/elimination of these trade barriers, liberalized investment rules and preferential rules of origin, U.S. parts and vehicle manufacturers have become more efficient and competitive in the North American market. In 1996, the U.S. exported 51,000 new cars and 31,500 new trucks to Mexico alone for a value of $1.2 billion.

 Textiles and Apparel: The NAFTA has increased economic activity and enhanced export prospects for textile and apparel producers in the United States. To be internationally competitive in the global marketplace, U.S. producers of textiles and apparel have improved their productivity and concentrated on specialized products. The NAFTA has enabled U.S. producers to optimize production and manufacturing investment in North America, resulting in a shift of production from the Far East to North America, strengthening the industry's worldwide position. Textile and apparel trade among the three NAFTA partners has nearly doubled since the NAFTA took effect, increasing from $6.4 billion in 1993 to $12.4 billion in 1996.

 How does the NAFTA affect the environment?

 North American consumers will benefit from various initiatives being undertaken by the NAFTA partners to strengthen and protect the North American environment. The NAFTA Commission for Environmental Cooperation (CEC) has deepened trilateral cooperation on a broad range of environmental issues, including illegal trade in hazardous wastes, endangered wildlife, and the elimination of certain toxic chemicals and pesticides. Through the CEC, Mexico has agreed to join the United States and Canada in banning the pesticides DDT and chlordane, ensuring that these long-lived toxic substances no longer cross our border. The United States and Mexico have also launched a Border XXI program establishing five-year objectives for achieving a clean border environment and a blueprint for meeting these objectives.

 Conclusion

 The North American Free Trade Agreement (NAFTA) will not be fully implemented until 2008. However, it is evident that NAFTA has already proved its worth to the United States by playing an important and vital role in increasing consumer choice, improving market access for U.S. products, and expanding U.S. jobs supported by exports.

Published by the Direct Selling Education Foundation
1666 K Street, N.W., Suite 1010
Washington, D.C. 20006
Telephone (202) 293-5760
Fax (202) 293-7483

Prepared in cooperation with the U.S. Department of Commerce, Office of Consumer Affairs, and the U.S. Department of Commerce International Trade Administration's Office of NAFTA.

 Copyright The Direct Selling Education Foundation 1998.