In 1994, the North American Free Trade Agreement (NAFTA) was signed by the United States, Mexico, and Canada. With the signing of this pact, tariffs have been lifted between the three countries involved.
The United States, Mexico, and Canada are all parties. This is the world’s biggest free-trade pact, with a combined GDP of $20 trillion.
Recent years have brought to light the advantages and disadvantages of this trade deal. Because of the tariff-free imports from Mexico, this deal lowers food costs in the United States.
Gas costs in the United States are also lowered by imported oil. Treaty-enforced trade and economic development have also grown.
However, many manufacturing jobs from the United States have been relocated to Mexico. Employees in the United States who held on to these positions experienced lower earnings, while many Mexican workers have been mistreated.
NAFTA was renegotiated in September of this year. All three countries must yet ratify the new agreement, officially known as the USMCA before it can go into force, which is still many years away.
Products manufactured in one of the three countries participating in NAFTA are exempt from tariffs on imports and exports. All parties must get equitable treatment in foreign direct investment under NAFTA, which confers most-favored-nation status.
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Procedures for resolving trade disputes are also laid forth in the NAFTA treaty. The agreement also facilitates the movement of business visitors between the three countries.