The North American Free Trade Agreement (NAFTA) became effective in Canada, Mexico, and the United States on January 1, 1994. This agreement removed the tariffs and other trade barriers on goods produced and sold in North America. NAFTA was built upon a prior 1989 trade agreement between the U.S. and Canada that was responsible for tariff reductions between the nations. NAFTA forms the world's second largest free trade area. The largest free trade area is the European Economic Area, which also became effective in 1994.
NAFTA was created to increase and promote commerce among North American countries. When NAFTA was passed, supporters had very high goals and expectations for the new trade pact. The elimination of tariffs was expected to increase exports and create a greater, more stable, and more efficient North American economy. The most direct economic benefit of trade comes from the fact that countries do not have the same production capabilities. They vary from one another because of differences in natural resources, levels of education, money, and technical knowledge. Without trade a country must make everything needed to support life, including items that cannot be produced in an efficient way. When trade is allowed, each country can concentrate its efforts in an efficient way (what they do best). When countries allow trade, the total production output increases.
Supporters also expected NAFTA to develop beneficial financial standards for all of North America though the regulation and improvement of environmental laws, investment opportunities, intellectual property rights (copyrights, software, patents), working conditions, and the overall economies of Canada, Mexico, and the U.S.
Supporters predicted that NAFTA would also strengthen the bonds of friendship and secure our future markets. They also thought that NAFTA would establish fair trading rules, stimulate more innovation, create new employment opportunities, and strengthen environmental regulations.
People who opposed NAFTA had many concerns about its effect on American workers. Their main concern was that U.S. jobs would be lost in the transfer of factories to foreign nations where U.S. companies would take advantage of cheap labor and the lax environmental policies. Environmental groups were concerned that enforcing pollution laws would be difficult in foreign countries with loose environment laws.
After ten years there is still wide spread disagreement on the effects of NAFTA. Supporters believe that NAFTA has been good financially for the economies of Canada, Mexico, and America. They say that the cost of goods has been lowered, and the standard...