CRF Blog

Backgrounder on NAFTA’s Economic Impact

by Bill Hayes

Backgrounders from the Council on Foreign Relations are primers on pressing world issues. They usually include histories, summaries, images, graphs, video, and links to additional resources.

A recent Backgrounder was on NAFTA’s Economic Impact.

The North American Free Trade Agreement, or NAFTA, is a three-country accord negotiated by the governments of Canada, Mexico, and the United States that entered into force in January 1994. NAFTA’s terms, which were implemented gradually through January 2008, provided for the elimination of most tariffs on products traded among the three countries. Liberalization of trade in agriculture, textiles, and automobile manufacturing was a major focus. The deal also sought to protect intellectual property, establish dispute-resolution mechanisms, and, through side agreements, implement labor and environmental safeguards.

NAFTA fundamentally reshaped North American economic relations, driving an unprecedented integration between Canada and the United States’ developed economies and Mexico, a developing country. NAFTA enjoyed bipartisan backing—it was negotiated by Republican President George H.W. Bush and passed through Congress and implemented under Democratic President Bill Clinton. It encouraged a more than tripling of regional trade and cross-border investment between the three countries also grew significantly. Yet NAFTA has remained a perennial target in the broader debate over free trade, largely because it is accused by some as leading to a shift in production, and jobs, to Mexico. [more]