NAFTA is the North American Free Trade Area, which is an agreement between countries such as America, Canada and Mexico. On the territory of these states a single market zone was formed. An agreement between states was signed by its heads in 1994. In accordance with the terms of the agreement, the countries that make up the association have committed themselves in the next decade to completely eliminate both customs and passport barriers. Also, agreements were reached to establish rules for the formation of fair competition and create the necessary conditions for the free movement of services with capital.
Legal aspects
From a legal point of view, NAFTA is a modernized US-Canadian free trade agreement that was signed in 1988. If we consider the agreement between the countries as a political phenomenon, then it appears in the format of America’s reaction to the process of European integration, including in education, which took place in 1992.
NAFTA supports the orientation towards the European Union model in terms of economic integration. The difference lies in the lack of desire for the formation of political supranational bodies. This is due to the developed differentiation of countries: America and Canada are highly developed regions, and Mexico is an actively developing area. NAFTA differs significantly from the EU in the number of countries, but significantly exceeds it not only in terms of GDP, but also in population. We can conclude that it is NAFTA - this is the largest economic association in the world.
What prospects did the cooperation open?
Thanks to cooperation, NAFTA member countries have stepped up trade and economic relations, while not only new ways of development have opened up, a number of restrictions have appeared. America partially transferred industrial production to Mexico, and began to import a wide range of goods from this state at lower prices in comparison with the import of similar goods from America.
At the same time, activity in the US labor market increased as capacities flow into Mexico. The problem of deflation has intensified. For Mexico, doors opened to the markets of the United States and other developed countries, the volume of foreign investment increased, including the volume of lending to the state economy.
As for economic dividends, they were one-sided in nature for a developing country. Enrichment was felt only by the elite. The most harmonious of all was Canada. She managed to avoid large-scale deindustrialization while increasing industrial exports. The main role of Canada was to act as a mediator in relations between America and the countries of Latin America.
What is included in the concept of NAFTA?
The exclusive economic zone is essentially a set of agreements that applies not only to the services and investment sectors, but also covers the union of economically developed countries. Entrepreneurial arrangements in North America include:
- Access to investment markets.
- Warranty.
- Services and intellectual property rights.
- State procurements.
- Compliance measures.
- Entrance for businessmen.
- Conflict resolution.
Obligations of the participating countries
The exclusive economic zone imposed certain restrictions on the participating countries. Thus, America, Canada and Mexico are required to maintain their national customs tariffs in the aspect of trade with third countries.
The free circulation of goods after a transitional period of 10 years (sometimes 15 years) in the zone of economic association was approved. The rule applies to products that are identified as manufactured in the United States, Mexico, and Canada. The agreement provides for improving the terms of trade in services, setting up a mechanism for mutual investment.
The agreement contains reservations regarding the temporary restoration of protection for certain industries that have suffered losses as a result of the import of certain categories of goods. The NAFTA countries, the list of which is presented above, must follow certain exceptions from the general regime of free economic relations.
Exceptions to the Rules
Against the background of the creation of a free trade zone, there are moments that do not meet the standard of agreement. So, in the framework of the association NAFTA (North American Free Trade Area), the following standards continue to apply:
- Mexico has reserved the right to impose restrictions on foreign activity in the oil segment.
- Canada has the right to restrict access to certain segments of information that are of some cultural importance. These are broadcasting and movie production, book publishing and record production.
- The United States retained the right to maintain an optimal level of domestic prices, the right to save procurement systems in the agricultural segment.
The specifics of the elimination of duties
All products in the framework of cooperation are divided into three categories. This is an industrial group (excluding textile products), an agricultural group and a textile one with clothes inclusive. Each category of goods has its own individual duty reduction schedule. It is worth saying about the complete removal of duties on different groups of products. In the future, the association of NAFTA sets goals much more significant. Within 5-15 years, it is planned to completely abolish most of the duties.
Investment activities in the framework of the association and other
In the framework of the NAFTA association, the countries of which the participants are listed above, there are 5 dominant principles for the protection of foreign investors and their capital. It:
- The absence of any discrimination in the investor sector.
- Complete elimination of requirements for both investors and their deposits.
- Free movement of any cash flows that are directly related to investing.
- Expropriation (although within the framework of international law).
- An open right to appeal to judicial authorities of an international rank in case of violation of the provisions of the current agreement.
The agreement provides for legal liability for violation of property rights to patents, trademarks and intellectual property. Legislation in force that allows you to determine the area of production of goods. So, the product is assigned to the state in whose territory it was subjected to the largest processing (calculated as a percentage).
Association Objectives
NAFTA is a large-scale regional free trade zone with a population of 406 million people and a combined GDP of $ 10.3 trillion. The formation of the tandem is due to a number of parameters and a list of goals that were planned to be achieved. The prerequisites for creating a union include the following:
- The composition of NAFTA is determined by the geographical proximity of the participating states. Moreover, the economies of states seemed to be mutually complementary. The same factor determined the structure of the NAFTA association. Coalition headquarters are not alone. There are three of them: in Ottawa, in Washington and in Mexico City.
- Close economic relations and trade relations have always existed between states, and production cooperatives have expanded.
- In Canada and Mexico, the number of American enterprises has been systematically increasing. Canadian TNCs thrive in America.
- Actively strengthening positions not only in the EU, but also in Japan.
It is quite clear why the NAFTA association was formed. In signing the agreement, the participating countries, in addition to the effectiveness of the partnership, also pursued a number of goals. This is the activation of trade by eliminating any restrictions, creating a healthy competitive environment, attracting investment, and ensuring a high level of intellectual property protection. The association does not cease to develop today, constantly expanding the scope of its influence.