When the Canada/U. S. free trade agreement came into effect, the Mexicans were very impressed by the provision and opportunities that opened for both sides. Mexico then approached the U. S. , seeking to form a similar agreement with them. This brought forth a new issue in Canada, should they let Mexico and the U. S. form an agreement without them? Or should they participate, thus transforming their deal with the U. S. into a trilateral agreement including Mexico. On June 12, 1991, the trade ministers of Canada, the United States and Mexico met in Toronto to open negotiations for a North American Free Trade Agreement (NAFTA).
This was an historic occasion. For the first time ever, a developing country agreed to sit down with two industrial countries to craft an agreement that would open its economy to full competition with the other two countries. If successful, the agreement promised to make the whole North American continent into one economic zone and set an important precedent for trade and economic cooperation between the wealthy countries of the North and less developed countries of the South. The challenge before them was both exciting and daunting.
A little more than a year later, the three trade ministers met again in Washington, to put the finishing touches on a new North American Free Trade Agreement. In just over a year the negotiators from the three countries had successfully met the challenge and put together a new trading frame work for North America. The North American Free Trade Agreement (NAFTA) was set to be implied. The North American Free Trade Agreement often raises questions regarding the new economic trading blocs around the world.
The twelve-nation European Community (EC), a Central American free trade zone, and a four-nation South American group, as well as preliminary discussions regarding an Asian trading bloc, all point to the fact that new economic realities already exist. NAFTA promises to have a major impact on the people in all three nations. There will obviously be short-term costs of adjustment, which will certainly hit some industries, regions, and workers harder than others. There will be definite winners in the agreement, and definite losers in the agreement.
There even might be disputes. Whether as workers, investors, consumers, or ordinary citizens in all three countries they may be affected. The final verdict on the North American Free Trade Agreement, may in fact not fully be realized for many weeks, months, or even years. However, in the following essay, the advantages to both Mexico and Canada will be analyzed, as well as the disadvantages to Mexico. It is safe to say that the advantages clearly outweigh the disadvantages, and that it will in fact be beneficial for both countries to be involved in this unique deal.
Canadas goals in the negotiation of NAFTA were very simple. They wanted to improve their access for their goods and services to Mexico and the United States. Canada wanted to guarantee their position as a prime location for investors seeking to serve all of North America. The NAFTA deal has realized these objectives set by Canada and will supply Canada with a new and sharper edge to their international competitiveness. The agreement has set a path for Canada widening their trade horizons, while also giving them a bigger stage on which to demonstrate their economic expertise and leadership.
An advantage for Canada is that the reduction of Mexican barriers will provide new markets and opportunities for Canadian goods and services. Canadian firms will be able to participate in, and expand sales in, sectors that were previously highly restricted, such as autos, financial services, trucking, energy and fisheries. Mexican tariffs and import licensing requirements will be eliminated, some immediately and others over 5 to 10 years, providing barrier free access to 85 million consumers.
The North American Free Trade Agreement covers virtually every field of business in Canada. NAFTA provides many provisions as well as both real and potential advantages to Canadians in all most all places in the work place. Agriculture products play a significant role in Canadas exports to other countries. Canadas excellent and fertile farming land has produced many great results. A very superior livestock and excellent crops have contributed to a productive and prosperous trade of their agricultural products and services around the world.
Canadas total exports surpasses $13 billion a year. Under NAFTA Canada and Mexico have worked out a separate agreement between themselves. Over all Canadian exports will enjoy immediate access to the Mexican market under the deal. Mexican import licenses on wheat, barley and table potatoes will be eliminated over a period of time. Also tariffs on lentils, honey, dried peas, millet, raspberries, rye and buckwheat will be dropped. All these items are important crops to Canadian farmers and with these costs cut they will enjoy a greater profit and more trade.
NAFTA also opens up great opportunities for livestock farmers. Because Mexico lacks an adequate fresh water supply their livestock operations arent very big. Therefore Mexico must rely on imports from Canada. NAFTA helps Canadian farmers and farm related businesses to a much greater ease to an ever growing market that will benefit them in the future. There are well over 140 000 Canadians employed in the auto manufacturing industry. As well, approximately 32 per cent of Canadas manufacturing exports is directly related to the auto industry.
The Mexican market however, is highly restricted, while 95 per cent of Mexican automotive imports enter Canada completely duty free. NAFTA addresses this imbalance, and more importantly corrects it. By the year 2003, Canada will have open access to the fastest growing automotive market in North America. Canadas service industry is the fastest growing sector of its economy. More than nine million Canadians, which is about two thirds of their work force are employed by the service sector. Cross border trade in services was dealt with for the first time in the Canada-U.
S. Free Trade Agreement. The NAFTA deal has included provisions for this type of trade and spells out procedures aimed at encouraging the recognition of licenses and certificates through the development of mutually acceptable professional standards and criteria such as education, experience and professional development. Under NAFTA a temporary entry across the border will be available for about 60 professions. Oceanographers, geographers and statisticians are three groups who can benefit from the NAFTA agreement.
When Canada was negotiating NAFTA one of their key objectives was to maintain the Free Trade Agreement rules with the U. S. with respect to energy trade. “Canada wanted to ensure that rules for investment, service and procurement affecting the energy and petrochemical sectors in Mexico provided the same opportunities for Canadian business as previously enjoyed in the U. S. ” NAFTA contributed to the removal of many investment and trade restrictions on petrochemicals. New opportunities will open up for Canadian business in private power generation.
Also, Canadian businesses will be able to bid for service and drilling contracts with the Mexican state – owned company Petroleos Mexicanos (PEMEX). The manufacturers of equipment that relates to the industry will also have easier access to the Mexican market. More than 500 000 Canadians are employed in the “four pillars” of the financial industry. These pillars consist of banking, insurance, securities firms and trust companies. Mexicos financial markets have opened up for Canada due to the NAFTA deal.
Canadian banking, insurance, and security firms will be able to operate wholly owned subsidies that will allow Canadian businesses to service their clients throughout the NAFTA region. Canadas financial sector, which is already strong and hearty, will realize new opportunities under NAFTA that will allow it to further expand and flourish. Canadas financial institutions have a lot to offer Mexico. Canadas strength, such as its technological know-how and its experience in operating large, integrated banking networks, are areas in which Mexico needs immediate and consistent strategic advice.
Foreign investment has played an important role in Canadas development as a nation. Investment is an important tool for Canadas growth and prosperity. It will continue to aid Canadas goal of maintaining and enhancing their competitiveness in the world marketplace. Under the free trade agreement with the U. S. , Canada agreed to raise the thresholds for the review of foreign takeovers by U. S. investors. With NAFTA Mexico will enjoy the same access as the U. S. investors. Canada has reserved its right to review large foreign takeovers.
In addition, the NAFTA allows Canada to continue safeguarding key factors like culture, social services, basic telecommunications and some modes of transportation by permitting Canada to maintain restrictions on foreign participation. Telecommunications is definitely going to play a crucial role in integrating the North American economy under NAFTA. A smooth transfer of data and the instantaneous electronic exchange of information via telecommunications networks are an essential tool of international trade. This will benefit Canada, fore they are a recognized world leader in the telecommunications field.
This will directly provide a market for Canadian developers in services such as electronic messaging, advanced data networks, and electronic mail. Mexico is in the process of modernizing its services so that they are compatible with Canadian and U. S. networks. By the year 2000, Mexicos demand for imported telecommunications products is expected to grow by 42 per cent. Anyone can plainly see the potential opportunities here for Canada. 1n 1991, more than one hundred and thirty five thousand Canadians were employed by the textiles and apparel industry, mostly in Montreal, Toronto and Winnipeg.
The NAFTA sets out strict rules of origin for most yarns, fabric and clothing. These new levels will help Canadian textile and apparel manufacturers expand their exports of products to the profitable U. S. market. With the NAFTA, Canadian and Mexican tariffs on apparel will be eliminated within 10 years. Many might worry in Canada and query if this is really an advantage for Canada. Arguably it really doesnt affect Canada because Mexican apparel is geared to cheaper, lower quality products. While the Canadian industry is moving toward producing higher value textiles and quality designer fashions.
The North American Free Trade Agreement has “streamlined” transportation between the three countries involved. Within six years, trucks and buses can crisscross the North American continent with virtually no border restrictions. Under NAFTA, for instance, a Canadian driver can take a load from Calgary, to Mexico city, with a stop in Texas for more goods. And on the way home, the same driver can deliver Mexican goods to both Canadian and U. S. destinations. This freedom of movement will increase the efficiency of our land carriers and will also enhance the competitiveness of our goods.