What was the major purpose of the passage of the north american free trade agreement (nafta) quizlet

WASHINGTON — President Trump signed the revised North American Free Trade Agreement into law on Wednesday, fulfilling a campaign promise to rewrite “one of the worst trade deals” in history.

“Today we are finally ending the NAFTA nightmare,” Mr. Trump said during a White House signing ceremony, calling the new trade deal a “colossal victory” for farmers, factory workers and other countries.

Much of the new United States-Mexico-Canada Agreement simply updates the 25-year-old North American Free Trade Agreement, with new laws on intellectual property protection, the internet, investment, state-owned enterprises and currency.

But the 2,082-page pact also includes significant changes in several key areas, including incentives to make cars in North America and open Canadian markets for American dairy farmers.

It rolls back a special system of arbitration for corporations that has drawn bipartisan condemnation, and includes additional provisions designed to help identify and prevent labor violations, particularly in Mexico. Some of those changes were inserted at the insistence of Democrats, who used their control of the House to secure long-desired policy changes.

Here are highlights from the new U.S.M.C.A.

NAFTA required automakers to produce 62.5 percent of a vehicle’s content in North America to qualify for zero tariffs. The new agreement raises that threshold, over time, to 75 percent. That’s meant to force automakers to source fewer parts for an “Assembled in Mexico” car from Germany, Japan, South Korea or China. The pact also requires 70 percent of a vehicle’s steel and aluminum to originate in North America, with steel being both melted and poured on the continent.

For the first time, the new agreement also mandates that 40 to 45 percent of the parts for any tariff-free vehicle must come from a so-called high-wage factory. Those factories must pay a minimum of $16 an hour in average salaries for production workers. That’s about triple the average wage in a Mexican factory right now, and administration officials hope the provision will either force automakers to buy more supplies from Canada or the United States or cause wages in Mexico to rise.

However, critics caution that factories may be able to game the rules by including some high-paid managers in their calculations. And there are risks to the changes.

Automotive analysts have warned that the wage provision could raise costs for American car companies and car buyers, slowing the auto market and weighing on economic growth over all.

The final provision, as written, could also prove relatively ineffective at shifting production, because it is not indexed to inflation. An average wage of $16 an hour will be less constraining in 2023 dollars than it is today.

The U.S.M.C.A. includes expansive changes that, at least on paper, should help level the playing field among workers in the United States, Canada and Mexico.

NAFTA’s original provisions on labor and environment were added as side letters after the original agreement was signed, to win the support of Democrats and ensure the deal’s passage during the Clinton administration. The U.S.M.C.A. moves these chapters into the main body of the trade agreement, meaning issues like the right to organize are now subject to the pact’s normal procedures for settling disputes.

The deal also expands those commitments, requiring more protections for workers, blocking imports of goods made with forced labor, and setting up mechanisms to ensure that those rules are enforced.

In response to the concerns of congressional Democrats, it sets up an independent panel that can investigate factories accused of violating labor rights and stop shipments of that factory’s goods at the border. It establishes an interagency committee to monitor Mexico’s labor reforms, as well as American attachés who will report to Congress on the progress.

In an annex to the agreement, Mexico also committed to enact sweeping legal changes to combat forced labor and violence against workers, and allow for independent unions and labor courts. The International Trade Commission has estimated that, if the changes are made, they will increase wages for Mexico’s unionized workers and decrease their pay gap with American workers.

In a major concession to Democrats, the Trump administration agreed to pare back certain protections for an advanced and very expensive class of drugs called biologics. The final agreement removes a provision that had offered the drugs 10 years of protection from cheaper alternatives in both Canada and Mexico.

The agreement expands other protections for intellectual property rights, for example, extending the 50 years of protection for copyrights in NAFTA to 70 years. It also includes new criminal penalties for theft of trade secrets, including cybertheft.

In a major win for tech firms, it gives internet companies like Facebook and YouTube certain protections from lawsuits related to the user content posted on their platforms. It also sets new standards by prohibiting governments from asking tech companies to disclose their source code or put duties on electronic transmissions.

The revised trade pact will allow more goods and services to flow tariff-free across North America. Credit...Alejandro Cartagena for The New York Times

The agreement gives American farmers some additional access to foreign markets, particularly in Canada. It does not dismantle Canada’s “supply management system,” which dictates how much Canadian farmers should produce so they can be profitable. But Canada did agree to eliminate a program that helps sellers of certain milk products, at home and abroad, and open its market to American milk, cream, butter, cheese and other products. In return, the United States expanded access to its market for Canadian dairy and sugar.

It also creates a list of cheese names that Mexico and the United States agree can be marketed without restriction in their countries, and it forces grocery stores in British Columbia to stop their practice of selling British Columbia-only wines on certain shelves, and stock American wines alongside them.

The agreement on cheese between the United States and Mexico. (PDF, 3 pages, 0.01 MB)

What was the major purpose of the passage of the north american free trade agreement (nafta) quizlet
3 pages, 0.01 MB

One of the biggest areas of contention stemmed from the mechanisms that companies and governments could turn to when they believed another party had violated NAFTA.

In a major change, the U.S.M.C.A. rolls back a special system of arbitration that allowed companies to sue governments for unfair treatment. The provision was criticized both by the Trump administration, which said it encouraged outsourcing, and by Democrats, who said it gave corporations too much power to challenge environmental and consumer regulations.

The system can no longer be used in disputes between the United States and Canada and is limited to disagreements between Mexico and the United States that involve a narrow range of industries, including petrochemicals, telecommunications, infrastructure and power generation.

Other systems for settling disputes between governments were basically maintained. The Trump administration ultimately gave up on an effort to eliminate the so-called Chapter 19 provision, which gives the three countries a neutral way to challenge one another’s tariffs and other actions. The administration also gave in to Democratic demands for removal of a provision that would have allowed any country to block a case against it from moving forward, if it so wished.

But the U.S.M.C.A. retains a more controversial addition by the Trump administration — a sunset clause that requires the three countries to review, after six years, whether to remain in the agreement. If any country decides not to continue with the pact, the U.S.M.C.A. will expire 16 years later.

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North American Free Trade Agreement (NAFTA), controversial trade pact signed in 1992 that gradually eliminated most tariffs and other trade barriers on products and services passing between the United States, Canada, and Mexico. The pact effectively created a free-trade bloc among the three largest countries of North America. NAFTA went into effect in 1994 and remained in force until it was replaced in 2020.

The North American Free Trade Agreement (NAFTA) was inspired by the success of the European Economic Community (1957–93) in eliminating tariffs in order to stimulate trade among its members. Proponents argued that establishing a free-trade area in North America would bring prosperity through increased trade and production, resulting in the creation of millions of well-paying jobs in all participating countries.

A Canadian-U.S. free-trade agreement was concluded in 1988, and NAFTA basically extended that agreement’s provisions to Mexico. NAFTA was negotiated by the administrations of U.S. Pres. George H.W. Bush, Canadian Prime Minister Brian Mulroney, and Mexican Pres. Carlos Salinas de Gortari. Preliminary agreement on the pact was reached in August 1992, and it was signed by the three leaders on December 17. NAFTA was ratified by the three countries’ national legislatures in 1993 and went into effect on January 1, 1994.

NAFTA’s main provisions called for the gradual reduction of tariffs, customs duties, and other trade barriers between the three members, with some tariffs being removed immediately and others over periods of as long as 15 years. The agreement ensured eventual duty-free access for a vast range of manufactured goods and commodities traded between the signatories. “National goods” status was provided to products imported from other NAFTA countries, banning any state, local, or provincial government from imposing taxes or tariffs on such goods.

NAFTA also contained provisions aimed at securing intellectual-property rights. Participating countries would adhere to rules protecting intellectual property and would adopt strict measures against industrial theft.

Other provisions instituted formal rules for resolving disputes between investors and participating countries. Among other things, such rules permitted corporations or individual investors to sue for compensation any signatory country that violated the rules of the treaty.

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Additional side agreements were adopted to address concerns over the potential labour-market and environmental impacts of the treaty. Critics worried that generally low wages in Mexico would attract U.S. and Canadian companies, resulting in a production shift to Mexico and a rapid decline in manufacturing jobs in the United States and Canada. Environmentalists, meanwhile, were concerned about the potentially disastrous effects of rapid industrialization in Mexico, given that country’s lack of experience in implementing and enforcing environmental regulations. Potential environmental problems were addressed in the North American Agreement on Environmental Cooperation (NAAEC), which created the Commission for Environmental Cooperation (CEC) in 1994.

Further provisions of NAFTA were designed to give U.S. and Canadian companies greater access to Mexican markets in banking, insurance, advertising, telecommunications, and trucking.

Many critics of NAFTA viewed the agreement as a radical experiment engineered by influential multinational corporations seeking to increase their profits at the expense of the ordinary citizens of the countries involved. Opposition groups argued that overarching rules imposed by NAFTA could undermine local governments by preventing them from issuing laws or regulations designed to protect the public interest. Critics also argued that the treaty would bring about a major degradation in environmental and health standards, promote the privatization and deregulation of key public services, and displace family farmers in signatory countries.

NAFTA produced mixed results. It turned out to be neither the magic bullet that its proponents had envisioned nor the devastating blow that its critics had predicted. Mexico did experience a dramatic increase in its exports, from about $60 billion in 1994 to nearly $400 billion by 2013. The surge in exports was accompanied by an explosion in imports as well, resulting in an influx of better-quality and lower-priced goods for Mexican consumers.

Economic growth during the post-NAFTA period was not impressive in any of the countries involved. The United States and Canada suffered greatly from several economic recessions, including the Great Recession of 2007–09, overshadowing any beneficial effects that NAFTA could have brought about. Mexico’s gross domestic product (GDP) grew at a lower rate compared with that of other Latin American countries such as Brazil and Chile, and its growth in income per person also was not significant, though there was an expansion of the middle class in the post-NAFTA years.

Little happened in the labour market that dramatically changed the outcomes in any country involved in the treaty. Because of immigration restrictions, the wage gap between Mexico on the one hand and the United States and Canada on the other did not shrink. The lack of infrastructure in Mexico caused many U.S. and Canadian firms to choose not to invest directly in that country. As a result, there were no significant job losses in the U.S. and Canada and no environmental disaster caused by industrialization in Mexico.

Although NAFTA failed to deliver all that its proponents had promised, it continued to remain in effect. Indeed, in 2004 the Central America Free Trade Agreement (CAFTA) expanded NAFTA to include five Central American countries (El Salvador, Guatemala, Honduras, Costa Rica, and Nicaragua). In the same year, the Dominican Republic joined the group by signing a free trade agreement with the United States, followed by Colombia in 2006, Peru in 2007, and Panama in 2011. According to many experts, the Trans-Pacific Partnership (TPP) that was signed on October 5, 2015, constituted an expansion of NAFTA on a much-larger scale.

Peter Bondarenko