FREE TRADE AGREEMENT OF THE AMERICAS A Free Trade

The North American Free Trade Agreement (NAFTA) became effective on 1 January 1994. Under NAFTA, virtually all trade barriers between the United States, Mexico, and Canada are eliminated, creating a single, unified North American market of 360 million persons (Magnusson, 1992).

When NAFTA negotiations were initiated, the United States was beset by staggering international trade deficits, a critical dependence on foreign energy supplies, and a fear that it would, over the coming 50 years, be excluded from a leading role in the international economy. Without any doubt, the Bush Administration looked to a North American free trade agreement as the Reagan Administration viewed the Canada-United States Free Trade Agreement (FTA) ù a way out of the country's international trade deficit. The Reagan Administration hopes were dashed to a great extent because one result of the FTA was not a combination of a massive increase in American exports to Canada, together with a reduction in

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runner to a Western Hemisphere free trading agreement encompassing all of North American, South America, and the Caribbean nations. In the absence of a Western Hemisphere free trade agreement, the United States fears that tying arrangements between the European Community and Latin American countries will condemn the United States to some degree of economic isolation in the twenty-first century. In this context, the European Community already has established formal ties between itself and countries in both Africa and Latin America through the Lome Agreement. The United States also looks to NAFTA as a means of restricting imports into the United States from other areas of the world. When inputs from a third country are used in goods traded between the United States and Canada, the FTA "Rules of Origin" require substantial processing which is both physically and commercially significant within the FTA countries before such goods may benefit from an FTA tariff preference. In some instances (steel, textiles, and apparel), FTA rules are even more stringent when third country materials are involved. The United States sought similar provisions in NAFTA, but was not completely successful. In negotiating NAFTA, the United States
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Approximate Word count = 1815
Approximate Pages = 7 (250 words per page)

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