North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) is a trilateral trade pact among the United States, Mexico, and Canada. Implemented on January 1, 1994, the agreement is intended to foster open and unrestricted commercial relations among its three signatories.

Supplemental agreements, also part of NAFTA, are the North American Agreement on Environmental Cooperation (NAAEC), the North American Agreement on Labor Cooperation (NAALC), and the Understanding on Emergency Action (Safeguards). Administered in the United States by the International Trade Administration of the Department of Commerce, NAFTA is one of several regional trading blocs in the Western Hemisphere.

These include the Andean Community of Nations (CAN, among Bolivia, Colombia, Venezuela, Ecuador, and Peru, f. 1969); the Caribbean Community and Common Market (CARICOM, f. 1973), the Southern Common Market (MERCOSUR, among Brazil, Argentina, Uruguay, Venezuela, and Paraguay, f. 1991), and the Central America–Dominican Republic–United States Free Trade Agreement (CAFTA-DR, f. 2004).

NAFTA’s supporters conceive of the agreement as an important stepping stone in the creation of a Free Trade Area of the Americas (FTAA), which would include the 34 nation-states and territories of the Western Hemisphere.

In its goal of fostering unrestricted commercial relations, NAFTA follows the principles of the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO).

NAFTA has sparked a huge debate between its supporters and opponents. Its principal supporters in the private sector consist of the hemisphere’s largest corporations, most of which are based in the United States.

They argue that in all three countries NAFTA will increase living standards, create new jobs, protect the environment; and ensure compliance with labor laws. Its principal opponents include labor, environmental, faith-based, indigenous rights, and consumer rights groups.

They maintain that NAFTA, like the WTO, promotes a "race to the bottom" by favoring large corporations over smaller enterprises, benefiting the rich more than the poor; increasing inequality, causing a net loss of jobs, fostering environmental degradation, and failing to adequately protect the rights of workers.

The communiqués of sub-commander Marcos, spokesperson of the Zapatistas of Chiapas, Mexico—a group whose rebellion against the Mexican government was timed to coincide with NAFTA’s implementation—convey many of the principal arguments of NAFTA’s opponents.

A large scholarly literature mirrors this debate. On the whole, the evidence demonstrates that NAFTA has increased trade dramatically while failing to meet its supporters’ expectations with regard to employment, poverty, inequality, the environment, and labor rights. In Mexico, poverty, inequality, and unemployment have all increased substantially since NAFTA’s implementation.

In the United States and Canada, the creation of new jobs has not kept pace with the outflows of capital and jobs traceable to NAFTA. The leftward tilt in Latin American politics since the 1990s has buttressed that continent’s opposition to multilateral trade agreements like NAFTA, the WTO, and the proposed FTAA.