In January 1994, Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA) and formed the world's largest free trade area. Designed to foster increased trade and investment among the partners, the NAFTA contains an ambitious schedule for tariff elimination and reduction of non-tariff barriers, as well as comprehensive provisions on the conduct of business in the free trade area. These include disciplines on the regulation of investment services and intellectual property. It also includes provisions for ethical standards. We will also discuss several different views as to the benefits as well as some negative effects of the agreement.
Before NAFTA was established, investing in Mexico was a difficult process. Investors needed the Mexican Government's approval and were also required to meet specific investment guidelines. These requirements necessitated investors to export a set level of goods and services, utilize domestic goods and services, and transfer technology to competitors.
Under NAFTA, investors no longer need government approval to invest and are treated as domestic investors. In Mexico, the elimination of investment barriers has allowed investment to expand. Increased trading and investment has then created many jobs, raised the Gross Domestic Product, and lowered consumer prices.
NAFTA has also increased intellectual property rights and allowed companies to obtain patents in Mexico and Canada. In the past, companies were hesitant to export research and development intensive goods; with increased intellectual property protection, however, exports of these goods have shown a definite increase. As a result of better trading conditions, exports and imports of most other goods have increased along with the research and development intensive goods.
The North American Free Trade Agreement (NAFTA) provides guidance for the analysis of international trade issues, because it addresses new issues concerning employment and environmental protection. While these provisions are included...