History
The North American Free Trade Agreement was ratified as legislation in the three involved countries by late 1993 and the agreement officially came into effect on January 1st of 1994. When NAFTA was officially ratified the agreement created the world’s largest free trade area and effectively linked 439 million people. NAFTA has also generated a connection between the three involved countries which has led to other benefits such as agreements being generated to regulate labour and the environment in North America.
Countries and products involved
Launched on January 1, 1994, NAFTA is one of the most successful trade agreements in history and has contributed to significant increases in agricultural trade and investment between the United States, Canada and Mexico and has benefited farmers, ranchers and consumers throughout North America.
With full implementation, the last remaining trade restriction on a handful of agricultural commodities such as U.S. exports to Mexico of corn, dry edible beans, nonfat dry milk and high fructose corn syrup and Mexican exports to the United States of sugar and certain horticultural products are now removed. The United States will continue to work with Mexico to build on the successes achieved to date. Since 2005, the United States has invested nearly $20 million in programs and technical exchanges to assist Mexico in addressing production, distribution and marketing-related challenges associated with the transition to free and open trade.
In 2007, Canada and Mexico were, respectively, the first and second largest export markets for U.S. agricultural products. Exports to the two markets combined were greater than exports to the next six largest markets combined.
NAFTA Eliminates Trade Barriers
The
objectives of NAFTA are to eliminate barriers to trade, promote conditions of
fair competition, increase investment opportunities, provide adequate
protection of intellectual property rights, establish effective procedures for
implementing and applying the agreements and resolving disputes, and to further
trilateral, regional and multilateral cooperation.
NAFTA helped to eliminate a number of non-tariff measures affecting
agricultural trade between the United States and Mexico. Both Mexico and the United States protected
their import-sensitive sectors with longer transition periods, tariff-rate
quotas, and, for certain products, special safeguard provisions. However, now
that the 15-year transition period has passed, free trade with Mexico prevails
for all agricultural products. NAFTA also provides for strict rules of origin
to ensure that maximum benefits accrue only to those items produced in North
America.
Other Key NAFTA Provisions
Sanitary and Phytosanitary Measures:
The NAFTA imposes disciplines on the development, adoption, and enforcement of
sanitary and phytosanitary (SPS) measures. These are measures taken to protect
human, animal, or plant life or health from risks that may arise from animal or
plant pests or diseases, or from food additives or contaminants. Disciplines
contained in NAFTA are designed to prevent the use of SPS measures as disguised
restrictions on trade, while still safeguarding each country's right to protect
consumers from unsafe products, or to protect domestic crops and livestock from
the introduction of imported pests and diseases.
Although
NAFTA encourages trading partners to adopt international and regional
standards, the agreement explicitly recognizes each country's right to determine
the necessary level of protection. Such flexibility permits each country to set
more stringent standards, as long as they are scientifically based. NAFTA also
allows state and local governments to enact standards more stringent than those
adopted at the national level, so long as these standards are scientifically
defensible and are administered in a forthright, expeditious manner.
Export Subsidies: The three NAFTA countries work toward
the elimination of export subsidies worldwide. The United States and Canada are
allowed under the NAFTA to provide export subsidies into the Mexican market,
under certain conditions, to counter subsidized exports from other countries.
Neither Canada nor the United States is allowed to use direct export subsidies
for agricultural products being sold to the other, and both countries are
required to consider the export interests of the other whenever subsidizing
agricultural exports to third countries.
Internal Support: Under NAFTA, the parties should endeavor
to move toward domestic support policies that have minimal trade or production
distorting effects, or toward policies exempt from domestic support reduction
commitments under the World Trade Organization.
Grade and Quality Standards:
The United States and Mexico agreed that when either country applies a measure
regarding the classification, grading, or marketing of a domestic product
destined for processing, it will provide no less favorable treatment for like
products imported for processing.
Rules of Origin
NAFTA
improves incentives for buying within the North American region and ensures
that North American producers receive the primary benefits of all newly
established tariff preferences. Goods not originating from the United States,
Mexico, or Canada must be significantly transformed or processed in one of
those countries before they receive NAFTA's lower duties for shipment to one of
the two other countries.
The
NAFTA rules of origin for agricultural products were constructed to prevent
Mexico from becoming an export platform for processed products made from
subsidized raw materials originating in non-NAFTA countries. There are also
strong rules of origin for U.S. import-sensitive commodities, such as citrus
and dairy items.
Bulk Commodities: All bulk agricultural commodities, and
certain processed products such as orange juice and cheese, are exempt from the de
minimis provision,
which otherwise allows up to 7 percent of non-NAFTA-origin product to be
included in final NAFTA goods.
Citrus: All single-fruit juices (fresh, frozen,
concentrated, reconstituted, fortified) must be made from 100-percent
NAFTA-origin fresh citrus fruit. The de minimis provision does not apply to any citrus
products.
Dairy Products: Only U.S. or Mexican milk or milk
products can be used to make cream, butter, cheese, yogurt, ice cream, or
milk-based drinks traded under NAFTA preferential rates.
Vegetable Oils: With the exception of certain industrial
fatty acids and acid oils, refining of crude oils within a NAFTA country does
not confer NAFTA origin. Making margarine and hydrogenated oils from imported
crude oils does not confer origin.
Sugar: Refining does not confer origin. In
order for sugar to be considered of North American origin, all processing of
sugarcane or sugar beets must take place in NAFTA territory.
Peanut Products: Mexico must produce the peanuts to
qualify for NAFTA preferential rates on peanuts and peanut products exported to
the United States. U.S. exports of peanut products to Mexico are subject to
this same rule.
