1. NAFTA North American Free Trade Agreement Joseph Najar, Daniel Stanworth, Scott Smoot, Jessica Hatch, Marcus Cardon

2. Agenda 1. Background 2. Current Situation 3. International Aspects 4. Special Problems 5. The Future

3. NAFTA Background Adam Smith Wealth of Nations Adam Smith Wealth of Nations One of the first to argue free trade. Even though it has been accepted on a national level in many places, international free trade struggles One of the first to argue free trade. Even though it has been accepted on a national level in many places, international free trade struggles

4. NAFTA Background Free Trade Free Trade Currently being sought after in several different forms of economic unions: Currently being sought after in several different forms of economic unions: Trade Areas Trade Areas Customs Unions Customs Unions Common Markets Common Markets Economic Unions Economic Unions

5. NAFTA Background NAFTA stands for North America Free Trade Agreement and is a Trade Area NAFTA stands for North America Free Trade Agreement and is a Trade Area Trade Areas Trade Areas Unrestricted trade among Member nations Unrestricted trade among Member nations Does not allow free movement of factors of production Does not allow free movement of factors of production No common external tariffs No common external tariffs No economic unity (monetary and fiscal) No economic unity (monetary and fiscal)

6. NAFTA Background Canada Canada Partly joined because America was going whether or not Canada was Partly joined because America was going whether or not Canada was Didn’t want to lose investment capital Didn’t want to lose investment capital Isolate themselves from US Protectionism Isolate themselves from US Protectionism Mexico spent more than they thought! Mexico spent more than they thought! US $325, while Japanese spend $300, and Europe spends $200 US $325, while Japanese spend $300, and Europe spends $200

7. NAFTA Background Canada’s goals in negotiation: Canada’s goals in negotiation: 1. Isolation from US protectionism 2. Gain further freedom of trade in the US 3. Maintain protection from Canadian cultural industries 4. Provide some insulation from US trade remedy laws

8. NAFTA Background Mexico Mexico Joined mostly hoping for additional investment capital Joined mostly hoping for additional investment capital Hoped for up to $15 billion in the first year Hoped for up to $15 billion in the first year Joined fearing exclusion from trade agreements Joined fearing exclusion from trade agreements

9. NAFTA Background Now why the US? Now why the US? Gives them more power in relation to EU and other economic unions Gives them more power in relation to EU and other economic unions Opens economic opportunities in Mexico Opens economic opportunities in Mexico Even though US is strongest, free trade is beneficial for all member nations Even though US is strongest, free trade is beneficial for all member nations Warmer political relations Warmer political relations

10. The Current Situation Marcus Cardon

12. Trilateral Agreements/Organizations North American Agreement on Environmental Cooperation (NAAEC) North American Agreement on Environmental Cooperation (NAAEC) Commission for Environmental Cooperation (CEC) Commission for Environmental Cooperation (CEC) North American Agreement on Labor Cooperation (NAALC) North American Agreement on Labor Cooperation (NAALC) Commission for Labor Cooperation (CLC) Commission for Labor Cooperation (CLC)

15. Responsibilities of the FTC Supervising the implementation of NAFTA Supervising the implementation of NAFTA Resolving disputes that may arise regarding NAFTA’s interpretation or application Resolving disputes that may arise regarding NAFTA’s interpretation or application Supervising the work of the NAFTA Secretariat and NAFTA committees and working groups Supervising the work of the NAFTA Secretariat and NAFTA committees and working groups Establishing additional committees and working groups as needed Establishing additional committees and working groups as needed

17. Secretariat Secretaries Rafael Serrano—Secretary General of the Mexico Secretariat Françoy Raynauld, Ph.D—Secretary of the Canada Secretariat Caratina L. Alston—Secretary Secretariat of the U.S., U.S. Department of Commerce

18. “We only deal with the administration of one very small portion of NAFTA. The treaty’s impact on anything, whether it’s the economy or Constitution or trade or anything like that—I don’t deal with that. Any comments on such things would have to come from the policy side, which would be the USTR or someone here at the Department of Commerce, but it’s certainly not my role.”Caratina Ashton

19. International Aspects Jessica Hatch

20. International Aspects Dispute resolution process Dispute resolution process Current disputes Current disputes Success of NAFTA Success of NAFTA

21. Dispute Settlement Initial disputes are directed to Committees and Working Groups for resolution Initial disputes are directed to Committees and Working Groups for resolution If necessary, problems are escalated to panel procedures If necessary, problems are escalated to panel procedures

22. Dispute Classifications Chapter Nineteen Chapter Nineteen Countervailing duty and anti- dumping Countervailing duty and anti- dumping Chapter Twenty Chapter Twenty Interpretation or application of NAFTA Interpretation or application of NAFTA Chapter Eleven Chapter Eleven Investment Investment Chapter Fourteen Chapter Fourteen Financial services Financial services

23. Chapter Nineteen Countervailing duty and anti-dumping Countervailing duty and anti-dumping Appeals of decisions made by government officials to apply national laws Appeals of decisions made by government officials to apply national laws Binational panel review Binational panel review Most active sector of dispute structure Most active sector of dispute structure Currently over 25 active disputes Currently over 25 active disputes

24. Chapter Twenty Interpretation and application of NAFTA principles Interpretation and application of NAFTA principles Steps intended to resolve disputes by agreement, if possible Steps intended to resolve disputes by agreement, if possible Begin with government-to- government consultations Begin with government-to- government consultations If unresolved, a meeting of Free Trade Commission may be requested If unresolved, a meeting of Free Trade Commission may be requested If still unresolved, an arbitral panel may be selected If still unresolved, an arbitral panel may be selected

25. Panel Rosters Rosters of possible individuals exist for each country Rosters of possible individuals exist for each country Selected based on objectivity, reliability, and sound judgment Selected based on objectivity, reliability, and sound judgment A roster exists for each dispute classification A roster exists for each dispute classification

26. Panel Selection Chapter Nineteen Chapter Nineteen Each party selects two members from their own country Each party selects two members from their own country The fifth member is from one of the two countries and generally alternates The fifth member is from one of the two countries and generally alternates Chapter Twenty Chapter Twenty Each party selects two members from the opposing country Each party selects two members from the opposing country The panel chair is selected by both parties and may be from any of the countries The panel chair is selected by both parties and may be from any of the countries

27. Rules of Procedure Very clear, stringent timelines and rules are set for both chapters Very clear, stringent timelines and rules are set for both chapters Chapter Nineteen lasts no more than 315 days Chapter Nineteen lasts no more than 315 days Chapter Twenty may take longer depending on hearing date set Chapter Twenty may take longer depending on hearing date set

28. Chapter Nineteen Example: Softwood Lumber Countervailing Duty Countervailing Duty Remanded to US Department of Commerce for changes in methodology Remanded to US Department of Commerce for changes in methodology Anti-dumping Anti-dumping Remanded to US Department of Commerce for changes in methodology Remanded to US Department of Commerce for changes in methodology Threat of Injury Threat of Injury Remanded to International Trade Commission Remanded to International Trade Commission Threat of injury required to establish CVD and AD policies Threat of injury required to establish CVD and AD policies

29. Chapter Twenty Example: Broom Corn Brooms Dispute over interpretation of a single clause: Dispute over interpretation of a single clause: “producers... of the like or directly competitive products” “producers... of the like or directly competitive products” Panel recommended that the U.S. “bring its conduct into compliance with the NAFTA at the earliest possible time.” Panel recommended that the U.S. “bring its conduct into compliance with the NAFTA at the earliest possible time.”

30. Success as of 2005 Real GDP Growth – 1994 to 2005: Real GDP Growth – 1994 to 2005: U.S.: 48% U.S.: 48% Canada: 49% Canada: 49% Mexico: 40% Mexico: 40% $2.2 billion in trilateral trade daily $2.2 billion in trilateral trade daily Trade among the nations increased 173% Trade among the nations increased 173% From $297 billion to $810 billion From $297 billion to $810 billion

31. Benefits to the U.S. Exports to NAFTA partners grew 113% Exports to NAFTA partners grew 113% NAFTA partners account for 55% of increase in agricultural exports NAFTA partners account for 55% of increase in agricultural exports Industrial production rose 49% Industrial production rose 49% 28% in prior period 28% in prior period 36.2% increase in business sector productivity 36.2% increase in business sector productivity 20.1% growth in jobs 20.1% growth in jobs Average unemployment rate dropped from 7.1% to 5.1% Average unemployment rate dropped from 7.1% to 5.1%

32. Benefits to Canada More than half of exports go to the U.S. More than half of exports go to the U.S. Exports now account for over 40% of GDP Exports now account for over 40% of GDP Exports to U.S. increased by 250% Exports to U.S. increased by 250% 86.6% of total exports go to NAFTA partners 86.6% of total exports go to NAFTA partners 17.5% increase in jobs from pre-NAFTA levels 17.5% increase in jobs from pre-NAFTA levels

33. Benefits to Mexico 37% difference between wages in export-related sectors and others 37% difference between wages in export-related sectors and others Agricultural exports to U.S. increased by $5.7 billion Agricultural exports to U.S. increased by $5.7 billion Exports to Canada grew almost 227% Exports to Canada grew almost 227% Two-way trade with the U.S. has grown more than 125% Two-way trade with the U.S. has grown more than 125% Productivity increased 55% Productivity increased 55%

34. Important Note The official sites for NAFTA list all positive reviews for the past 12 years. The official sites for NAFTA list all positive reviews for the past 12 years. Others claim these benefits may have come from other changes in the economy Others claim these benefits may have come from other changes in the economy Plenty of information exists to argue both sides Plenty of information exists to argue both sides

35. Special Problems Daniel Stanworth Daniel Stanworth

36. Special Problems or Debates 1. Employment effects 2. Mexico’s Suffering Agriculture Sector 3. Environmental problems and decreased standard of living

37. Like any multinational treaty, NAFTA has its pros and cons, its cheerleaders and detractors. More than 10 years after the treaty was signed, protests continue, especially by citizenry "south of the border." NAFTA seems to favor North America's big business over the needs of Latin America's indigenous peoples. While jobs may have been created in Latin America, the pay is generally low and available jobs are far from home. The benefits appear to go to governments, rich land owners, and large businesses. Like any multinational treaty, NAFTA has its pros and cons, its cheerleaders and detractors. More than 10 years after the treaty was signed, protests continue, especially by citizenry "south of the border." NAFTA seems to favor North America's big business over the needs of Latin America's indigenous peoples. While jobs may have been created in Latin America, the pay is generally low and available jobs are far from home. The benefits appear to go to governments, rich land owners, and large businesses.

38. United States Employment United States United States Overall, 28 million new jobs created since 1994 Overall, 28 million new jobs created since 1994 Very small amount, if any, can be directly attributed to the creation of NAFTA Very small amount, if any, can be directly attributed to the creation of NAFTA

39. United States Employment Heavy Debates on this issue Heavy Debates on this issue Clinton administration claimed an increase of 300,000 new jobs in because of NAFTA in 1999. Clinton administration claimed an increase of 300,000 new jobs in because of NAFTA in 1999. EPI estimated that creation of NAFTA has resulted in net loss of 440,000 US Jobs EPI estimated that creation of NAFTA has resulted in net loss of 440,000 US Jobs Their reasoning is because others are only looking at new exports and disregarding new imports. Their reasoning is because others are only looking at new exports and disregarding new imports. Ross Perot and the “Giant Sucking Sound” Ross Perot and the “Giant Sucking Sound”

40. Canadian Employment 2.3 million jobs created in Canada since NAFTA 2.3 million jobs created in Canada since NAFTA Increase of 17.5% Increase of 17.5% Very little debate on the employment effects of NAFTA in Canada Very little debate on the employment effects of NAFTA in Canada

41. Mexican Employment Mexico Mexico Employment increased directly following NAFTA introduction, but has recently decreased. Employment increased directly following NAFTA introduction, but has recently decreased. Many new jobs were in the Maquiladora area’s Many new jobs were in the Maquiladora area’s Agriculture sector specifically hit hard Agriculture sector specifically hit hard Estimated 28,000 small and med sized businesses eliminated due to low cost producers. Estimated 28,000 small and med sized businesses eliminated due to low cost producers.

43. Environmental/Standard of living Effects Maquiladora - is a factory that imports materials and equipment on a duty-free and tariff- free basis for assembly or manufacturing and then re-exports the assembled product usually back to the originating country. Maquiladora - is a factory that imports materials and equipment on a duty-free and tariff- free basis for assembly or manufacturing and then re-exports the assembled product usually back to the originating country. Maquiladora firms have approx. doubled since NAFTA Maquiladora firms have approx. doubled since NAFTA 2,143 to over 3,703 currently 2,143 to over 3,703 currently This is a problem for NAFTA because Maquiladora’s are notorious for having terrible low-pay working conditions. This is a problem for NAFTA because Maquiladora’s are notorious for having terrible low-pay working conditions.

44. A town about a mile from a Maquiladora factory

45. Maquiladora Working conditions Women especially discriminated against Women especially discriminated against Average wage is $1.00 per hour Average wage is $1.00 per hour Work 10-12 hours a day Work 10-12 hours a day Compared to sweat shops of China Compared to sweat shops of China Many are working to improve rights of Maquiladora workers. Many are working to improve rights of Maquiladora workers.

46. Environmental Conditions Special side agreement in NAFTA to calm environmentalists about toxic waste around Maquiladora’s. Special side agreement in NAFTA to calm environmentalists about toxic waste around Maquiladora’s. Did side agreement work Did side agreement work No enforcing power No enforcing power Different views of environmental quality. Different views of environmental quality. Many argue the pollution has worsened. Many argue the pollution has worsened. "NAFTA has intensified severe problems of water and air pollution, hazardous wastes dumping and increased the incidence rates of certain diseases and birth defects in the border region." "NAFTA has intensified severe problems of water and air pollution, hazardous wastes dumping and increased the incidence rates of certain diseases and birth defects in the border region."

47. Environmental Effects "We have no way to provide water, sewage, and sanitation workers. Every year, we get poorer and poorer even though we create more and more wealth." "We have no way to provide water, sewage, and sanitation workers. Every year, we get poorer and poorer even though we create more and more wealth." Ciudad Juarez, Mayor Gustavo Elizondo Ciudad Juarez, Mayor Gustavo Elizondo

48. Mexico’s Agriculture US farmers are being subsidized. US farmers are being subsidized. Mexico farmers do not receive subsidies, this… Mexico farmers do not receive subsidies, this… Puts downward pressure on Mexican Farmers Puts downward pressure on Mexican Farmers Results in Dumping Results in Dumping US Farmers selling below cost in Mexico because they have already received subsidies. US Farmers selling below cost in Mexico because they have already received subsidies. Results in Unemployment and Immigration to United States Results in Unemployment and Immigration to United States Some claim as many as 2 million Mexican farmers are out of business Some claim as many as 2 million Mexican farmers are out of business

49. Mexico’s Agriculture Many claim dumping is evident due to Mexico’s imports of U.S. agriculture products Many claim dumping is evident due to Mexico’s imports of U.S. agriculture products $3.6 billion in 1993 $3.6 billion in 1993 $7.9 billion in 2003 $7.9 billion in 2003 $8.5 billion in 2004 $8.5 billion in 2004 U.S. farmers are better at the expense of Mexican farmers U.S. farmers are better at the expense of Mexican farmers

50. Mexico’s Agriculture Immigration from Mexican Farmers has increased since NAFTA. Immigration from Mexican Farmers has increased since NAFTA. At least 4 million Mexican immigrants in the United States. At least 4 million Mexican immigrants in the United States. 150,000+ per year 150,000+ per year Many due to population growth Many due to population growth A problem because this goes directly against one of the original claims of NAFTA. A problem because this goes directly against one of the original claims of NAFTA.

51. The Future Joseph Najar

52. The future Reforms needed for NAFTA to meet its goals Reforms needed for NAFTA to meet its goals Solving NAFTA’s most difficult problems Solving NAFTA’s most difficult problems The prospects of NAFTA surviving another decade The prospects of NAFTA surviving another decade

53. Meeting goals GOAL: Enhance the economic well-being of its members GOAL: Enhance the economic well-being of its members Main problem: Cross-border trade (non- economic) Main problem: Cross-border trade (non- economic) Transportation routes Transportation routes Investment opportunities Investment opportunities

55. Solving problems International trades vs. local institutions International trades vs. local institutions Rules and procedures for handling disputes Rules and procedures for handling disputes

56. Surviving another decade Maybe Maybe Bridging the gap Bridging the gap Security and Prosperity Partnership of North America (SPP) Security and Prosperity Partnership of North America (SPP) Blueprint for a further North American Community Blueprint for a further North American Community