NAFTA Explain the functions of the North American Free Trade Agreement (NAFTA). NAFTA is the North American Free Trade Agreement between the U .S., Canada and Mexico. It became effective on January 1, 1994.

The purpose of NAFTA was to encourage trade by eliminating tariffs on most goods originating in and traded between the U.S., Mexico and Canada over a fifteen-year period. Benefits of NAFTA include: Elimination of tariffs, lower prices, and increased profit margins. Increased trade results in an increase in sales of U.S. goods. Increased manufacturing output and wages.

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