1

Introduction

With the entry in force of the North American Free Trade Agreement (NAFTA), the Parties have
experienced a significant increase in the trade of goods and services between them. The three
Customs Administrations have agreed that the Rules of Origin as set out in Chapter Four of the
NAFTA and the NAFTA Rules of Origin Regulations (the Regulations), define the framework to
be observed by exporters/producers in order to have their goods qualify as "originating goods",
and be eligible for a NAFTA preferential tariff treatment when imported into the territory of any
of the other Parties to the Agreement.
As a result, it has become important for the Customs Administration of each Party to verify that
the goods for which NAFTA preferential tariff treatment has been claimed comply with the
Rules of Origin.
In this respect, the three Customs Administrations have considered that the establishment of
verification guidelines is important and useful. The Customs Administrations of all Parties have
consulted during the development of this manual and these guidelines include general,
examination and reporting standards for NAFTA origin verifications.
This manual is intended to be used by: Origin Audits Unit of Revenue Canada (Canada);
Direction of International Audit of the Ministry of Finance and Public Credit (Mexico); and, the
offices of Regulatory Audit and Field Operations, U.S. Customs Service (United States).
However, portions of this manual may also be used by other areas within each Customs
Administration as deemed appropriate.
The main purpose of this document is to establish the recommended technical verification
framework to be observed when conducting NAFTA verifications. The application of the
provisions included therein should take into consideration the circumstances involved in each
verification and be adapted accordingly. It is understood that this document will be updated on a
continual basis.
This of the NAFTA Verification Manual provides revisions to the November 1995 version to
reflect changes in the Regulations which became effective on October 1, 1995.









2

How Was NAFTA Started?

The impetus for NAFTA actually began with President Ronald Regan, who campaigned on a
North American common market. In 1984, Congress passed the Trade and Tariff Act. This is
important because it gave the President "fast-track" authority to negotiate free trade agreements,
while only allowing Congress the ability to approve or disapprove, not change negotiating
points. Canadian Prime Minister Mulroney agrees with Reagan to begin negotiations for the
Canada-U.S. Free Trade Agreement, which was signed in 1988, went into effect in 1989 and is
now suspended due to NAFTA.(Source: NaFina, NAFTA Timeline)Meanwhile, Mexican
President Salinas and President Bush began negotiations for aliberalized trade between the two
countries. Prior to NAFTA, Mexican tariffs on NAFTA.

When Was NAFTA Started?

NAFTA was signed by U.S. President George H.W. Bush, Mexican President
Salinas, and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the
legislatures of the three countries in 1993. The U.S. House approved it by 234 to 200 on
November 17and the Senate by 60 to 38 on November 20. It was signed into law by
President Bill Clinton on December 8, 1993 and entered force January 1, 1994. Although it
was started by President Bush, it was a priority of President Clinton's, and its passage is
considered done of his first successes. (Source: History.com, NAFTA Signed into Law,
December 8, 1993












3


REASONS

The objectives of this Agreement, as elaborated more specifically through its principles and
rules, including national treatment, most-favored-nation treatment and transparency, are to:
a) Eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services
between the territories of the Parties;
b) Promote conditions of fair competition in the free trade area;
c) Increase substantially investment opportunities in the territories of the Parties;
d) Provide adequate and effective protection and enforcement of intellectual property rights in
each Party's territory;
e) Create effective procedures for the implementation and application of this Agreement, for its
joint administration and for the resolution of disputes; and
f) Establish a framework for further trilateral, regional and multilateral cooperation to expand
and enhance the benefits of this Agreement.


ESTABLISHMENT

NAFTA was signed by President George H.W. Bush, Mexican President Salinas, and Canadian
Prime Minister Brian Mulroney in 1992. It was ratified by the legislatures of the three countries
in 1993. The U.S. House of Representatives approved it by 234 to 200 on November 17, 1993.
The U.S. Senate approved it by 60 to 38 on November 20, three days later. It was signed into law
by President Bill Clinton on December 8, 1993 and entered force January 1, 1994.




PROCESS

The impetus for NAFTA actually began with President Ronald Reagan, who campaigned on a
North American common market. In 1984, Congress passed the Trade and Tariff Act. This is
important because it gave the President "fast-track" authority to negotiate free trade agreements,
while only allowing Congress the ability to approve or disapprove, not change negotiating
points. Canadian Prime Minister Mulroney agreed with Reagan to begin negotiations for the
Canada-U.S. Free Trade Agreement, which was signed in 1988, went into effect in 1989 and is
now suspended due to NAFTA.

Meanwhile, Mexican President Salinas and President Bush began negotiations for a liberalized
trade between the two countries. Prior to NAFTA, Mexican tariffs on U.S. imports were 250%
higher than U.S. tariffs on Mexican imports. In 1991, Canada requested a trilateral agreement,
which then led to NAFTA. In 1993, concerns about liberalization of labor and environmental
regulations led to the adoption of two addendums to NAFTA.


4


ADVANTAGES OF NAFTA

NAFTA created the worlds largest free trade area. It allows 580 million people in the U.S.,
Canada and Mexico to export to each other at a lower cost. As a result, it is responsible for $1.6
trillion in goods and services annually. Estimates are that NAFTA increases the U.S. economy,
as measured by GDP, by as much as .7% a year.

First, it eliminates tariffs. This reduces inflation by decreasing the costs of imports. Second,
NAFTA creates agreements on international rights for business investors. This reduces the cost
of trade, which spurs investment and growth especially for small businesses. Third, NAFTA
provides the ability for firms in member countries to bid on government contracts. Fourth,
NAFTA also protects intellectual properties.

Trade between the NAFTA signatories more than quadrupled, from $580 billion in 2012 to $3.6
trillion in 2012 (latest data available). Exports from the U.S. to Canada and Mexico grew from
$142 billion to $452 billion in 2007 and then declined to $397 billion in 2009, thanks to the 2008
financial crisis. Exports from Canada and Mexico to the U.S. increased from $151 billion to
$568 billion in 2007, then down to $438 billion in 2009. (Source: Office of the US Trade
Representative, NAFTA)


DISADVANTAGES OF NAFTA

NAFTA has many disadvantages. First and foremost is, NAFTA made it possible for many U.S.
manufacturers to move jobs to lower-cost Mexico. The manufacturers that remained lowered
wages to compete in those industries.

The second disadvantage was that many of Mexico's farmers were put out of business by U.S.-
subsidized farm products. NAFTA provisions for Mexican labor and environmental protection
were not strong enough to prevent those workers from being exploited.

At a time when globalization and a free world economy are being promoted, NAFTA exposes
the hypocrisy of the developed nations which are turning to protectionism and regionalism to
secure their own best interests.










5


Salient Features of the Member nations of NAFTA

The long-time growth in the U.S. trade deficit accelerated dramatically after NAFTA became
effective in 1994. According to the Bureau of Labor Statistics, the $30 billion U.S. trade deficit
in 1993 increased 281% to an inflation-adjusted $85 billion in 2002.
Despite a growing trade deficit, a report from the Office of the U.S. Trade Representative
categorizes the trade effects as positive:
Between 1993 and 2006, trade among NAFTA partners climbed 197%, from $297 billion
to $883 billion.
U.S. exports to NAFTA partners grew 157%, versus 108% to the rest of the world in the
same period.
Daily NAFTA trade in 2006 reached $2.4 billion.
U.S. manufacturing output rose 63% from 1993-2006, compared to an increase of 37%
from 1980-1993.

A unique aspect of the trade agreement
covering Canada, the U.S. and Mexico
is the significant differences between the
three NAFTA partners. In terms of
economic size, the U.S. is clearly
dominant, accounting for 88.4 percent of
gross domestic product (GDP) in the
NAFTA area at US$10.4 trillion.
Canada, a little less than one-tenth the
size of the U.S., accounts for 6.2 percent
while Mexico accounts for 5.4 percent
of NAFTA area GDP.
When measured by population, the U.S.
is still the dominant partner, but not to
the same degree as for GDP. The U.S.
accounts for just over two-thirds of
NAFTA area population at 68.6 percent,
compared to 23.9 percent for Mexico
and 7.5 percent for Canada. Mexico also possesses a much younger and faster growing
population than its two northern neighbours creating a unique set of opportunities and challenges
for that country within North America.
6

Possibly most revealing is the difference in GDP
per capita between the three NAFTA partners.
Here too, the U.S. stands out. When measured
using market exchange rates, the U.S. posts the
highest GDP per capita at US$36.2 thousand per
person. Canada lags somewhat at US$23.4
thousand, while Mexico trails significantly at
US$6.3 thousand per head.. Using a PPP
measure of GDP per capita closes the gap
between Canada and the U.S. from US$12.9
thousand per person (using market exchange
rates) to US$4.7 thousand per person (using PPP
exchange rates). Still, Canada's GDP per capita
is only 85 percent of U.S. levels and the object
of much debate and concern in Canada. The
difference is even more dramatic for Mexico,
whose GDP per capita measured at market exchange rates is only 17.4 percent of the U.S. level
but jumps to 25.7 percent of the U.S. level when measured using PPPs.
The sheer size of the U.S. economy makes it less dependent on trade in general, including with
its NAFTA partners. Canada has the highest trade-to-GDP ratio at more than 80 percent, and just
under 60 percent of Mexico's GDP is traded, while the U.S.'s trade-to-GDP ratio is around one-
quarter. Furthermore, both Canada and Mexico send more than 80 percent of their exports to
NAFTA partners and rely on them for the large majority of their imports. The U.S. however
relies on its NAFTA partners for only about 30
percent of its trade.


7

Impact of NAFTA on USA


The major benefits that US businesses received in general from NAFTA are:
larger North American market access
New export and investment opportunities
Elimination of tariffs; Canadian and U.S. tariffs were eliminated on January 1, 1998;
Mexico became duty free by the year 2008 for North American made products
Creation of strong "rules of origin" for North American made products
Effective procedures to resolve trade disputes
Establishment of compatible standards of goods between the three countries
Facilitation of cross-border movement of goods and services

The specific area that was largely affected by the enforcement of NAFTA is as follows:



Trade Balances

The US goods trade deficit with NAFTA was $94.6 billion in 2010, a 36.4% increase ($25
billion) over 2009.
The US goods trade deficit with NAFTA accounted for 26.8% of the overall U.S. goods trade
deficit in 2010.
The US had a services trade surplus of $28.3 billion with NAFTA countries in 2009 (the latest
data available).




Boosted U.S. Farm Exports:

Agricultural exports to Canada and Mexico grew from 22% of total U.S. farm exports in 1993 to
30% in 2007. To put this into perspective, agricultural exports to Canada and Mexico were
greater than exports to the next six largest markets combined. Exports to the two countries nearly
doubled, growing 156% compared to a 65% growth to the rest of the world

NAFTA increased farm exports because it eliminated high Mexican tariffs. Mexico is the top
export destination for U.S.-grown beef, rice, soybean meal, corn sweeteners, apples and beans. It
is the second largest export destination for corn, soybeans and oils. NAFTA has enabled United
States agricultural producers and consumers to more effectively use their comparative
advantages and to respond more efficiently to changing economic conditions.



8


Created Trade Surplus in Services:

More than 40% of U.S. GDP is services, such as financial services and health care. These aren't
easily transported, so being able to export them to nearby countries is important. NAFTA
boosted U.S. service exports to Canada and Mexico from $25 billion in 1993 to $106.8 billion in
2007, which dropped to $63.5 billion in 2009. NAFTA eliminates trade barriers in nearly all
service sectors, which are often highly regulated. NAFTA requires governments to publish all
regulations, lowering hidden costs of doing business.


Reduced Oil and Grocery Prices:


The U.S. imported $116.2 billion in oil from Mexico and Canada as shale oil (down from $157.8
billion in 2007). This also reduces U.S. reliance on oil imports from the Middle East and
Venezuela. Mexico is a friendly country, whereas Venezuela's president often criticizes the U.S.
Both Venezuela and Iran have started selling oil in currencies other than the dollar, contributing
to the decline in the dollar's value.
Since NAFTA eliminates tariffs, oil prices are lower. The same is true for food imports, which
totaled $29.8 billion in 2010 (up from $28.9 billion in 2009). Without NAFTA, prices for fresh
vegetables, chocolate, fresh fruit (except bananas) and beef would be higher. (Source:
USTR,NAFTA Imports)

Stepped Up Foreign Direct Investment:

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico more
than tripled to $357 billion in 2009, up from $348.7 billion in 2007. Canadian and Mexican FDI
in the U.S. grew to $237.2 billion, up from $219.2 billion in 2007. That means this much
investment poured into U.S. manufacturing, finance/insurance, and banking companies.
NAFTA reduces investors' risk by guaranteeing they will have the same legal rights as local
investors. Through NAFTA, investors can make legal claims against the government if it
nationalizes their industry or takes their property by eminent domain.











9




Improved transportation system:

Better transportation became necessary because of the high growth rate in agricultural products.
In order to do a better job of improving the efficiency of truck and rail freight services and make
improvements to supply chain infrastructure, a new report by the Commission for
Environmental Cooperation (CEC), a multimodal organization established in 1994 as part of the
North American Agreement on Environmental Cooperation, a side agreement to NAFTA. This
report was entitled Destination Sustainability: Reducing Greenhouse Gas Emissions from Freight
Transportation in North America' the report also calls for the NAFTA partners to form "a
ministerial-level forum to foster an integrated, intelligent freight transportation system" and
criticizes the condition of a "congested and deteriorating" North American freight transport
infrastructure.





Protection of each countrys import-sensitive crops:

NAFTA allowed Mexico and the United States to protect their import-sensitive crops with longer
transition periods to eliminate barriers to trade. Import-sensitive product markets would fluctuate
too much if there were no protection. For the United States and Mexico, dairy products, cotton,
peanuts and sugar are import-sensitive.

United States employment:

Free trade has caused more U.S. jobs losses than gains, especially for higher-wage jobs. While
corporate profits soar, individual wages stagnate, held at least partly in check by the brave new
fact of off shoring -- that millions of Americans' jobs can be performed at a fraction of the cost in
developing nations near and far. Since labor is cheaper in Mexico, many manufacturing
industries moved part of their production from high-cost U.S. states. Between 1994 and 2010,
the U.S. trade deficits with Mexico totaled $97.2 billion, displacing 682,900 U.S. jobs. Jobs
were moving to Mexico because of NAFTA. In 1991, the average hourly compensation in
Mexican manufacturing was only about 14 percent of the U.S. gure: $2.17 in Mexico versus
$15.45 for the United States. There was also concern that investment would move from the
United States to the Mexican economy, further eliminating U.S. jobs. Nearly 80% of the losses
were in manufacturing. California, New York, Michigan and Texas were hit the hardest because
they had high concentrations of the industries that moved plants to Mexico. These industries
included motor vehicles, textiles, computers, and electrical appliances. There has been a
substantial decline in employment in the United States textile and apparel sectors. The building
of maquiladoras was largely responsible for this decline.

10

Crisis in the US Textile and Apparel Industry:

The U.S. textile and apparel industry complex is experiencing its worst downturn in over two
decades. It is faced with a major crisis that is believed to have been caused by recent global trade
liberalization and Asian currency devaluation. Most observers credit policies stemming from
global trade liberalization, such as the World Trade Organization (WTO) and the North
American Free Trade Agreement (NAFTA), with contributing to rapid job losses, especially in
the rural areas of the Southeast region where the industry complex is disproportionately located.
Since 1995 and especially following the 1997-98 global financial crisis, the currencies of the top
textile exporting countries in Asia seem to have collapsed causing a shock wave of low-priced
textile products in global markets. The value of textile imports from Asia, which had shown
relatively little growth over the previous ten years, grew rapidly by about 36 percent (%) from
1995 through 2001 in tandem with a decrease in Asian currencies. Additionally, volatility in the
apparels market, fueled by frequent fashion changes, has contributed to exacerbating the
economic stress faced by industry participants and rural residents. Therefore, the recent spate of
plant closures may seriously impact economic development opportunities that are offered by the
industry complex in those rural communities where a majority of plants are located. Canada. To
date, trade among the countries is led by industrial and value-added agricultural goods such as
textiles and apparel. U.S. yarn and fabric production have become more automated, while
apparel production in Mexico is more labor intensive and can be produced at relatively lower
wages.

11

Impact of NAFTA on Mexico


Upon implementation, almost 70% of U.S. imports
from Mexico and 50% of U.S. exports to Mexico
received duty-free treatment. The remainder of the
duties was eliminated over a period of 15 years, after
the agreement was in effect. The agreement also
contained provisions for market access to U.S. firms
in most services sectors; protection of U.S. foreign
direct investment in Mexico; and intellectual property rights protection for U.S. companies. At
the time that NAFTA went into effect, a number of economic studies predicted that the trade
agreement would have a positive overall effect on the Mexican economy, narrowing the U.S.-
Mexico gap in prices of goods and services and the differential in real wages.

Economic Effects

A number of studies have found that NAFTA has brought economic and social benefits to the
Mexican economy as a whole, but the benefits have not been evenly distributed throughout the
country. Most studies after NAFTA have found that the effects on the Mexican economy tended
to be modest at most. While there have been periods of positive growth and negative growth
after the agreement was implemented, much of the increases in trade began in the late 1980s
when the country began trade liberalization measures. Though its net economic effects may have
been positive, NAFTA itself has not been enough to lower income disparities within Mexico, or
between Mexico and the United States or Canada.

A 2005 World Bank study assessing some of the economic impacts from NAFTA on Mexico
concluded that NAFTA helped Mexico get closer to the levels of development in the United
States and Canada. The study states that NAFTA helped Mexican manufacturers to adopt U.S.
technological innovations more quickly and likely had positive impacts on the number and
quality of jobs. Another finding was that since NAFTA went into effect, the overall
macroeconomic volatility, or wide variations in the GDP growth rate, has declined in Mexico.
Business cycles in Mexico, the United States, and Canada have had higher levels of
synchronicity since NAFTA, and NAFTA has reinforced the high sensitivity of Mexican
economic sectors to economic developments in the United States.

Several economists have noted that it is likely that NAFTA contributed to Mexicos economic
recovery directly and indirectly after the 1995 currency crisis. Mexico responded to the crisis by
implementing a strong economic adjustment program but also by fully adhering to its NAFTA
obligations to liberalize trade with the United States and Canada.

NAFTA may have supported the resolve of the Mexican government to continue with the course
of market-based economic reforms, resulting in increasing investor confidence in Mexico. The
World Bank study estimates that FDI in Mexico would have been approximately 40% lower
without NAFTA

12


























2004 2012*
Population (millions) 105 140
Nominal GDP ($US billions) 677 855
GDP, PPP** Basis
($US billions)
1,017 3,597
Per Capita GDP ($US) 6,684 6,450
Per Capita GDP in $PPPs 7,351 9,680
Total Merchandise Exports (US$ billions) 95 515
Exports as % of GDP 21% 38%
Total Merchandise Imports (US$ billions) 91 216
Imports as % of GDP 22% 32%
Public Debt/GDP 32% 23%
13




Mexican Wages and Per Capita GDP

Any changes in Mexican wages since NAFTA implementation cannot be solely attributable to
trade integration. Wages are reflective of a number of economic variables including GDP,
productivity, exchange rates, and international trade. Mexican wages have generally followed the
cycles of the Mexican economy for many years. Wages increased from the early 1980s until the
mid-1990s, when the currency crisis hit when real wages fell by 15.5%. Wages increased after
1996 until 2000 when the percent increase was 10.8% and then stagnated for several years.
Wages fell by 3.2% in 2008 and by 5.0% in 2009.










14

Mexican Productivity, Exports and Prices

With Mexicos entry into NAFTA, the expectation was that relative prices for certain Mexican
crops would decrease while prices for other crops would likely remain the same. This was based
on the economic expectation that, by removing Mexicos price and trade interventions in basic
crops such as grains and oilseeds, prices for the same goods in Mexico and the United States
would equalize. Prices for crops that were exported such as fruits and vegetables were expected
to stay the same because these had not been subject to major government intervention before or
since NAFTA. NAFTA and Mexicos internal reforms were expected to lead to the law of one
price for all agricultural goods produced in North America. This meant that prices for basic
crops such as grains and oilseeds produced in Mexico, which previously had fixed prices by the
government, would decline as these goods faced competition from U.S. goods.

NAFTA and agriculture reform measures were also expected to increase efficiency in Mexicos
agricultural production as farmers adjusted to competition from lower cost imports. Production
in agricultural sectors that had prior price and trade interventions was expected to decrease as
lower-priced imports from the United States entered the market, while production in export-
oriented sectors, mainly fruits and vegetables, was expected to increase. As a result of these
shifts, employment was expected to increase in some areas, but, according to one study, the
increase was not expected to be large enough to absorb all the workers who would be displaced
by reduced production in other sectors. After NAFTA, Mexican prices of basic crops such as
maize dropped and, subsequently, Mexican imports of those crops increased. Mexican
agricultural production, however, did not decrease after NAFTA. The Mexican governments
unilateral liberalization of corn and NAFTA were both factors in declining prices of corn in
Mexico. In 1993, the price of corn in Mexico was $4.84 per bushel; the price fell to $3.65 per
bushel in 1997 and has remained at about the same level ever since.43 Mexican corn production,
however, increased despite the decline in prices.

Total production of maize increased from an annual average of 12.5 million metric tons during
the 1983-1990 period to an annual average of 17.7 million metric tons, representing an increase
of 41%, during the post-NAFTA period of 1994-2001.44 Mexican corn production yields were a
fraction of U.S. corn production yields in 2003, but in spite of the low yields,

Mexican corn production increased after NAFTA. Between 1990 and 2003, Mexican corn
production increased 44%, a faster rate of growth than U.S. corn production which increased by
27% during the same time period.45
Most of the effects from NAFTA likely took place within the first ten years of implementation.

From 1993 to 2003, Mexican exports to the United States in agricultural products increased from
$2.7 billion in 1993 to $6.3 billion in 2003, while Mexican exports to Canada increased from
$136 million to $409 million over the same time period. Mexican imports from the United States
also increased during this time period, from $3.6 billion in 1993 to $7.9 billion in 2003.

Mexican exports to the United States sharply increased in the following categories: sugar and
related products (595%), beverages excluding fruit juices (584%), and grains and feeds (328%).
15

U.S. foreign direct investment in the Mexican food processing industry more than doubled from
$2.3 billion in 1993 to $5.7 billion in 2000






Devastating Mexicos Rural Peasants



Prior to NAFTA, small plots of land were permanently deeded to Mexicos peasant farmers. In
preparation for NAFTA, Mexico was required to change its constitution to allow foreign
ownership of this land and allowed these plots to be sold or seized by creditors. In addition,
NAFTA opened the door for the dumping of large amounts of subsidized U.S. agricultural goods
on the Mexican market lowering prices and endangering the livelihood of peasant farmers. For
example: Corn is the primary crop in Mexico, but post-NAFTA farmers received 70% less for
their harvests because U.S. corn imports into Mexico more than quadrupled since 1993.

Unable to compete with U.S. prices and with no employment prospects in their rural
communities, more than 2 million Mexican farmers have been forced off
their land since NAFTA was enacted. These disenfranchised farmers have migrated to the
already overcrowded and heavily polluted cities and manufacturing zones of Mexico, worsening
existing environmental and health conditions.

It is estimated that NAFTA created only 700,000 manufacturing jobs in Mexico - far too few to
absorb the 2 million displaced farmers and the 130,000 jobs lost in domestic manufacturing due
to the replacement of formerly domestically produced goods by imports. 13 Mexican farmers
have called for a suspension of NAFTA tariff reductions, and a re-negotiation of NAFTAs
agriculture provisions, but to no avail. With no employment prospects and worsening living
conditions, many farmers believe their only option to earn a living is to attempt the perilous
crossing into the United States.











16

Impacts on Mexicos Natural Resources

The weakening of environmental standards by NAFTA has also caused the increased use of
chemical intensive production methods in Mexicos large commercial farms. These methods
include the use of harmful pesticides and fertilizers that pollute land and water resources.
Specifically, they contribute to high soil salinity, ground-level ozone, lake and river acidification,
and the disruption of natural forest processes. The change in land ownership and the more export
oriented farming system in Mexico have also led to a dramatic loss of forests and the unique
biodiversity they sustain. Peasant farmers who were driven off their lands were forced to clear
forestland for farming and
fuel. Since the implementation of NAFTA the annual rate of deforestation in

Mexico has risen to 1.1 million hectares practically doubling the prior rate of 600 thousand
hectares. 15 This places Mexico second behind Brazil in the rate of deforestation





Effects on Employment

While official unemployment rates in Mexico are lower now than they were before NAFTA,
there has been an increase in underemployment, as well as an increase in low-pay jobs and low-
productivity jobs. Therefore, even though unemployment has decreased, the incomes of the
employed have actually fallen.



Quality of Life

There have been some improvements to Mexican quality of life due to NAFTA. According to
several speakers at a NAFTA conference, health care for the citizens of Mexico has improved
due to the import of U.S. health services and technology. However, there is still room for
improvement, because the wide range in differing income levels, as well as differences in the
level of health care facilities, is affecting the availability and delivery of quality health care to all
Mexican citizens.

Maquiladora Workers Were Exploited:

NAFTA expanded the maquiladora program, in which U.S.-owned companies employed
Mexican workers near the border to cheaply assemble products for export to the U.S. This grew
to 30% of Mexico's labor force. These workers have "no labor rights or health protections,
workdays stretch out 12 hours or more, and if you are a woman, you could be forced to take a
pregnancy test when applying for a job," according to Continental Social Alliance.

17

Mexico's Environment Deteriorated:

In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other
chemicals, costing $36 billion per year in pollution. Rural farmers expanded into more marginal
land, resulting in deforestation at a rate of 630,000 hectares per year.





NAFTA Called for Free Access for Mexican Trucks:

Another agreement within NAFTA has not been implemented. NAFTA would have allowed
trucks from Mexico to travel within the United States beyond the current 20-mile commercial
zone limit. A demonstration project by the Department of Transportation (DoT) was set up to
review the practicality of this. In 2008, the House of Representatives terminated this project, and
prohibited the DoT from allowing this provision of NAFTA to ever be implemented without
Congressional approval.

Congress was concerned that Mexican trucks would have presented a road hazard. They are not
subject to the same safety standards as U.S. trucks. In addition, this portion of NAFTA was
opposed by the U.S. truckers' organizations and companies, who would have lost business.
Currently, Mexican trucks must stop at the 20-mile limit and have their goods transferred to U.S.
trucks.

Impact of NAFTA on Canada

Canadas NAFTA exports have grown substantially, and have been particularly successful in
high valueadded sectors such as automotive equipment (trucks, cars and parts), machinery and
parts and industrial goods.
In 1998, total threeway trade among Canada, Mexico and the United States rose to about $752
billion, with CanadaU.S. and CanadaMexico trade accounting for $484 billion (Sources:
Statistics Canada, U.S. Department of Commerce and SECOFI). Since the implementation of the
NAFTA, Canadas trade with the United States has risen 80%, while trade with Mexico has
doubled.
Canada & US
Goods & Services
Canada and the U.S. enjoy the world's largest bilateral trading relationship. Nearly $1.9 billion in
goods and services cross the border each and every day. Canada-U.S. trade has grown
considerably since the Canada-U.S. Free Trade Agreement came into force in 1989. Between
1989 and 2002, Canadian exports to the U.S. grew at an average annual rate of 9.3 percent while
18

imports grew at 7.5 percent. Canada's trade surplus with the U.S. also increased tremendously,
from $4.4 billion in 1989 to a peak of $90.7 billion in 2001 before falling off somewhat to $86.4
billion in 2002.

Canada's Trade in Goods and Services with the U.S.
Millions of current dollars CAGR*, % Share of World, %
1989 1994 2002 1989-
1994
1994-
2002
1989-
2002
1989 1994 2002
* Compound annual growth rate
Source: Statistics Canada, Balance of Payments back
Exports 119,820 199,864 382,101 10.77 8.44 9.33 71.43 76.60 80.85
Imports 115,381 182,574 295,734 9.61 6.21 7.51 68.62 72.37 69.89
Balance 4,439 17,290 86,367 N/A N/A N/A (1,109.7) 200.30 174.42
Since the implementation of the Canada-U.S. Free Trade Agreement in 1989 and the North
American Free Trade Agreement in 1994, there has been a dramatic increase in two-way inter-
dependence between the two economies. As can be seen from the adjacent chart, U.S. exports
bound for Canada increased from $US 93.4 billion in 1989 to $US 184.9 billion in 2002 - an
increase of almost 100 percent. Similarly, U.S. imports from Canada increased from $US 99.0
billion to $US 232.4 billion between 1989 and 2002.
Millions of current US$ CAGR *, % Share of World, %
1989 1994 2002 1989-
1994
1994-
2002
1989-
2002
1989 1994 2002
U.S. Exports to Canada
Goods and
Services
93,415 132,076 184,929 7.17 4.30 5.39 19.18 18.76 19.03
Goods 79,888 114,650 160,879 7.49 4.33 5.53 22.20 22.80 23.57
Services 13,527 17,426 24,050 5.20 4.11 4.53 10.64 8.67 8.31
U.S. Imports from Canada
Goods and
Services
98,982 141,497 232,421 7.41 6.40 6.79 17.06 17.67 16.51
Goods 89,944 131,149 213,151 7.83 6.26 6.86 18.83 19.61 18.27
Services 9,038 10,348 19,270 2.74 8.08 6.00 8.82 7.85 8.01
19

Most Canada-U.S. trade is merchandise trade. Merchandise trade accounted for 87.0 percent of
total U.S. exports to Canada in 2002 and 91.7 percent of total imports from Canada in that year.
Merchandise trade growth between the two countries also outpaced growth in services trade,
albeit by a small margin. Canada-U.S. trade is much more dependent on merchandise trade than
the U.S's trade with other countries, as is shown by Canada's low share of U.S. services trade -
8.3 percent for exports in 2002, compared to 23.6 percent of merchandise trade. A similar trend
is observed for imports where Canada accounts for only 8.0 percent of U.S. services imports 18.3
percent for merchandise.
Tourism
Furthermore, Canadians are an important source of tourism revenue for the U.S. They spent US$
6.2 billion on travel in the U.S. in 2002, or 8.5 percent of total foreign travel spending in the U.S.
that year.
Commodity
Canada is also an important source for U.S. imports used in the production process or directly
consumed. Just under one-fifth of total U.S. imports come from Canada. Over 60 percent of U.S.
Wood & Paper imports came from Canada in 2002, despite the softwood lumber dispute between
the two countries. Canada is the most important source of U.S. imports in seven out of the eleven
major commodity groupings and ranks among the top five sources in the remaining four
commodity groups.

These trade numbers also reflect the high degree of integration between Canadian and U.S.
industry. Over 40 percent of U.S. trade with Canada is intra-firm - trade occurring between parts
of the same firm operating on both sides of the border. The automotive industry is a prime
example of this type of trade. Every vehicle assembled in North America now contains nearly
US$ 1,250 of Canadian made parts.

Energy
20

Canada is also the U.S.'s most important source of energy imports. Canada is undoubtedly the
dominant source of Electricity and Natural Gas imports, accounting for 100 percent of U.S.
electricity imports, and 93.5 percent of natural gas imports. But, even for oil combining crude
and non-crude oil, the U.S. imports more from Canada than from any other country.

Investment
Canada-U.S. economic linkages extend beyond trade. As already mentioned, many firms operate
on both sides of the border with activities that are often tightly integrated. Canada is one of the
most important destinations for U.S. investment abroad. 10.1 percent of U.S. direct investment
assets abroad were located in Canada in 2001. There are just under 2,000 U.S. affiliates
operating in Canada that generate US$ 2.9 trillion in sales annually.

Canadians are also among the largest investors in the U.S., accounting for 8.2 percent of all
foreign direct investment in that country in 2001. Canadian companies own US$ 434 billion in
assets in the U.S., generating US$ 168 billion in sales and employing 643 thousand people and
returned US$4.4 billion in income to Canadians.
Canada & Mexico
21

Canada-Mexico trade has accelerated rapidly over the past decade, with exports more than
doubling. The largest increase, however, came from imports, which jumped nearly five-fold.
And, while Canadian exports to Mexico remain relatively small, at only $3.2 billion in 2001, or
0.7 percent of our total exports, Mexico has emerged as one of our most important sources of
imports at $13.1 billion, or 3.1 percent of our total imports.
Goods & Services

Canada appears to have a large and growing trade deficit with Mexico, reaching $9.9 billion in
2001, more than four times the value of our exports to Mexico. It is important to note, however,
that the merchandise portion of Canada-Mexico trade statistics may suffer significantly from a
transshipments problem.
Goods and Services Trade, Canada Mexico
Millions of current
dollars
CAGR*, % Share of World, %
1989 1994 2002 1989-
1994
1994-
2002
1989-
2002
1989 1994 2002
Exports 733 1,269 3,208 11.59 14.17 13.09 0.44 0.49 0.67
Imports 2,042 4,983 13,067 19.53 14.76 16.73 1.21 1.98 3.13
Balance (1,309) (3,715) (9,860) N/A N/A N/A 327.25 (43.04) (15.78)

Merchandise Trade
Agricultural products account for the largest share of Canada's exports to Mexico at 31.3 percent
in 2002; they have also been the fastest growing among those products that are exported in a
significant quantity to Mexico. Agriculture, along with Transportation Equipment, is the only
major category of exports to see its share increase from 1989. Machinery & Electronics and
Transportation Equipment, combined, accounted for nearly three quarters of our imports from
Mexico in 2002, up from just over 65 percent in 1989. Most of this increase came from
22

Transportation Equipment which saw its share rise from 17.7 percent in 1989 to 29.3 percent in
2002 and was second only to Misc. Manufactures in terms of overall growth.
Canada and Mexico trade in many of the same product categories (at the aggregate level) such as
Agriculture, Metals & Minerals, Machinery & Electronics and Transportation Equipment. It is
interesting to note that, in this context, a trade deficit is recorded with Mexico in each of these
categories with the exception of Agriculture. It is also interesting to note that only in Agriculture
does Mexico account for more than one percent of Canada's total exports (at 3.5 percent in
2002), whereas Mexico accounts for more than one percent of our imports in 7 out of 11
categories, and a relatively high share of two categories of imports that are considered 'high-
tech', namely Machinery & Electronics and Transportation Equipment, as well as the catch-all
category of Miscellaneous Manufactures.
At a more disaggregated level, significant differences in the types of products coming from
Canada and Mexico can be observed. For example, there is considerable trade in both directions
between Canada and Mexico in Automotive products. At the 6-digit HS level, 43.2 percent of
Canada's imports fall under HS 870223 (Automobiles with engines displacing between 1500 and
3000cc) while 22.9 percent of our exports fall under the same HS category. This is likely due to
different models of cars being produced in each country with Volkswagen, for example,
producing only in Mexico and exporting to Canada.


Service trade
Unlike Canada's service exports to the U.S., services account for a relatively large and growing
share of Canada's exports to Mexico. In 2001, 14.1 percent of Canada's exports to Mexico were
services, up from 13.0 percent in 1989. The opposite is true for imports, however, with the share
of services falling almost 9.0 percentage points between 1989 and 2001 and now accounting for
only 7.2 percent of our total imports from Mexico. It was more the result of a rapid increase in
merchandise imports from Mexico over this period, rather than slow growth of services, that
contributed to this observed decline.
23


In dollar terms, both imports and exports have increased tremendously. Exports more than
quadrupled since 1989, to reach $453 million in 2001, while imports more than doubled to $950
million. As has been reported throughout this report, Canada still imports far more than it exports
to Mexico with our trade deficit in 2001 exceeding our exports. Overall, Canada's services trade
with Mexico outpaced that with other countries as can be seen from Mexico's rising share of our
total services trade.

Similar to trends in trade with other countries, Commercial services is the fastest growing and
largest sector of Canada's services exports to Mexico, accounting for 39.7 percent of our total
24

services exports in 2001, up from about one-third in 1989. On the import side, however, Travel
accounts for nearly four-fifths of Canada's services imports from Mexico.
Investment
Canada's foreign direct investment (FDI) linkages with Mexico have grown rapidly, particularly
since the North American Free Trade Agreement (NAFTA) came into effect in 1994.

As can be seen from the table below, Mexican inward FDI to Canada stood at $83 million in
2002, representing only 0.02 percent of total FDI in Canada. Because of the relatively small
amount of Mexican FDI in Canada, little can be said about trends or its industrial distribution.
Canadian FDI in Mexico outstrips Mexican FDI in Canada by a factor of forty-to-one. Canadian
FDI in Mexico accelerated dramatically since the NAFTA came into effect in 1994 as is
illustrated in the adjacent graph. Canadian FDI in Mexico increased fourteen-fold since 1989,
and Mexico's share of total Canadian outward FDI nearly tripled from 0.3 percent in 1989 to a
still modest 0.8 percent in 2002. Canadian FDI stock in Mexico is down from its peak in 2000,
but this factor is more likely due to the global economic slowdown and to a decline in M&A
activity. There is surprisingly little evidence of a dramatic impact of the 1994 Mexican Peso
crisis on Canadian FDI in Mexico.
Table 3.4.1
Canada's Direct Investment Position (Stock) with Mexico
Millions of current
dollars
CAGR*, % Share of World, %
1989 1994 2002 1989-
1994
1994-
2002
1989-
2002
1989 1994 2002
Outward 237 1,073 3,344 35.26 15.27 22.58 0.26 0.73 0.77
Inward 12 177 83 71.30 -9.03 16.04 0.01 0.11 0.02
Balance 225 896 3,261 N/A N/A N/A (0.69) (10.82) 3.96
Below figure shows that the biggest investments occurred in the Finance & Insurance industry,
which accounted for 36.0 percent of Canadian FDI in Mexico in 2001, while not even registering
25

in 1989. In fact, this industry accounted for 38.3 percent of the growth in Canadian FDI in
Mexico since 1989.

The next two largest sectors for Canadian FDI in Mexico are 'Other Industries' which includes
everything from the telecommunications industry to Textiles & Clothing and the Food &
Beverage industry; and Energy & Minerals, a traditionally strong industry for Canadian
investment in developing countries. It is interesting to note that, in 1989, 25.7 percent of
Canadian FDI in Mexico was in the Machinery & Transportation Equipment sector, but this
share had fallen to 6.0 percent in 2001.

26

NAFTA in a Global Context
Measured by gross domestic product (GDP)
the NAFTA area is the world's largest
trading bloc, representing 32.7 percent of
world GDP or US$11.4 trillion. The E.U., at
25.8 percent of global economic output, lags
considerably. Even with the addition of ten
new members next year, the E.U. GDP will
increase from its current US$7.9 trillion to
US$8.3 trillion, still well behind the NAFTA
region. Asia, although not a formal trading
bloc, has many trade linkages as shown by
its high level of intra-regional trade -
comparable to that of formal trading blocs,
and accounts for another 23.0 percent of
global output
4
. This triad combined accounts
for 85.9 percent of global output.
Measured by trade volumes, the E.U. dominates: it accounts for 36.8 percent of global exports
and 34.8 percent of imports, compared to 18.8 percent and 24.8 percent for NAFTA. NAFTA
ranks second, behind the E.U. for imports, but ranks third, only marginally above the rest of the
world (ROW) for exports, a reflection of the U.S.'s huge current trade deficit.
Using total trade, however, somewhat
overstates the size of the E.U. and other
regions relative to NAFTA. With only
three member countries, much of
NAFTA's exchanges occur within
countries (mostly in the U.S.) and are
therefore not considered trade. As can be
seen from the chart below, this fact is
reflected in the much higher share of
intra-E.U. trade compared to NAFTA:
60.7 percent v. 46.3 percent. By using
only external exports, the NAFTA
region is the world's largest importer but
comes after the E.U. and Asia in terms
of exports.



27

Share of Exports, Percent
Destination
Exporter NAFTA EU Asia ROW
Data: IMF, Direction of Trade Statistics
NAFTA 56.0 14.6 17.4 12.0
EU 10.9 61.0 7.2 20.9
Asia 26.3 14.7 48.1 10.9

Measured by global foreign direct investment (FDI), NAFTA ranks number two behind the E.U.
for both inward FDI - 23.9 percent of global FDI stocks in 2001 v. the E.U.'s 38.7 percent - and
even further behind for outward FDI - 25.0 percent compared to the E.U.'s 52.5 percent. Similar
to trade, however, these numbers should be interpreted carefully, as a considerably larger share
of investment qualify as FDI within the fifteen E.U. countries while most U.S. investment is
consid-ered domestic.




Share of Imports, Percent
Source
Importer NAFTA EU Asia ROW
Data: IMF, Direction of Trade Statistics
NAFTA 38.1 17.6 31.5 12.8
EU 8.1 58.9 12.0 21.0
Asia 13.7 12.1 56.3 18.0
28

Impact of NAFTA on India


Indias Trade with NAFTA in 2007-2010
Indias Export to NAFTA in 2005-2006 Total USD 18,817.71 million
Indias Import from NAFTA in 2005-2006 Total USD 10,472.22 million



Loss of Indias Textiles Trade Share

After the formation of NAFTA (North American Free Trade Agreement) in 1994, USA's imports
of textiles and clothing items have clearly shown a trend in favor of the Latin American
suppliers, particularly Mexico, which is a member of NAFTA. Though India maintains a very
low share in the global textiles trade (3%), it is one of the major items in India's export basket.
However, India's position as a major supplier of textiles and clothing items to USA market has
been sliding since 1994. It was at 7th position in 1995 and came down to 11th position in 2001.
On the other hand, Mexico has improved its position from 7th in 1993 to 2nd just after China, in
2001. The direction of trade reveals that India has been losing much of its share due to USA's
specific arrangements with countries under CBI (Caribbean Basin Initiative) and NAFTA. The
decline of exports to USA is a warning signal of increasing competition from NAFTA-
empowered Mexico. There are particularly two categories, i.e., cotton yarn and woven apparel
group, where India has been affected, and this may be a result of the trade diversionary effects
due to Mexico.








29


India signs BIPA with Mexico

India and Mexico signed a bilateral investment protection agreement (BIPA) in 2007 that
enabled India Inc to access North American Free Trade Agreement (NAFTA). The agreement
was signed by Finance Minister P Chidambaram and the visiting Mexican Finance Minister M
Eduardo Sojo Garza-Aldape. Mexico, being part of Nafta and having a large number of
important partners including the EU, offered a good opportunity to Indian companies and
enhanced market access through investments and joint ventures. This agreement was possible
because over the years, India had maintained good relations with Mexico. Bilateral trade
between the two countries has increased to USD 1.5 billion in 2007 from USD 251 million in
1999. Among others, Indian exports to Mexico are engineering goods, chemicals and
pharmaceuticals, gems and jewellery, and textiles, while Mexican exports to India are dominated
by crude and petrochemicals. Investors of Indian origin have pumped in over USD 1.6 billion
over 60 business ventures in Mexico, apart from recent joint ventures in pharmaceuticals and IT
sectors by Indian companies.

Indian Exports and Imports with members of NAFTA

Each table below gives a list of important items of export and import between India and USA,
Canada and Mexico respectively.

Indias Trade with USA

Exports Imports
Precious Stones Sophisticated Machinery
Diamond and Gold Jewellery Electrical Machinery
Woven Apparel Medical & Surgical Equipment
Knit Apparel Aircrafts, space crafts
Fish and Seafood Plastic
Iron/Steel Products Wood Pulp
Organic Chemicals Metals

Indias Trade with Canada

Exports Imports
Readymade Garments Newsprint in rolls or sheets
Gems, jewellery and precious stones Copper ores concentrates
Engineering Goods Peas dried and shelled
Iron & Steel articles Iron scrap, potash, copper
Coffee Wood Pulp
Spices Minerals
Organic Chemicals Industrial Chemicals


30




Indias Trade with Mexico



Exports Imports
Transport Equipment Articles of iron and steel
Drugs, Pharmaceutical Iron and steel
Readymade Garments Plastic articles
Inorganic/organic chemicals Nuclear reactor
Machinery & Instruments Medical or surgical equipments
Electronic Goods Ores, slag and ash
Dyes and intermediaries Organic chemicals

Indias exports to NAFTA countries (USA, Canada & Mexico) showed a positive growth in
2003-2004. Indian exports to USA from January to October 2003 grew by 11.5% as compared to
the year before. Although global imports to Canada from January to October 2003 declined by
3.28%, Indian an exports shows a growth of 9-10% as compared to the year before. Indian
exports also showned a healthy growth of 22% to Mexico from January to September 2003,
period as compared to the year before.

USA:
USA is Indias largest trading partner and foremost export destination, accounting for about 22%
of Indias global exports. The year 2003 was a good year for Indian exports to USA, having
grown by 11.55% for January October 2003. The global imports of USA had also increased by
8.8%. India is now the 18
th
largest supplier of goods to USA (was 19
th
in 2002). Substantial
increases had been registered in the exports of pharmaceutical products (85.14%), electrical
machinery (55%), organic chemicals (37%), misc. textile articles (19%), fish and seafood
(12.79%). Knit apparels, leather articles, iron and steel and edible fruits & nuts are the sectors
where the growth has been negative.
Exports of USA to India had also shown a strong growth, registering an increase of 25.36% to
reach US $ 4.15 billion during the ten-month period in 2003. Among its 25 large export
destinations (India is 24
th
), the growth rate in exports to India continued to be the highest, more
than even China. Several sectors like electrical machinery, other machinery, chemical products,
aircraft and parts, cotton yarn and fabrics, plastics and mineral oil had shown positive growth.
Fertilizers exports of USA had also grown significantly to US $ 87.9 million during January
October 2003, as against only US $ 34.2 million for the same period in 2002.







31

CANADA:
Indian exports to Canada had increased by 9.1% during January October 2003 compared to the
same period last year. The growth had been remarkable since the global imports of Canada had
declined by 3.2% during this period. Nine out of top ten exports products of India had shown a
positive growth except cotton yarn and fabric. Organic chemicals had shown a growth of 35.67%
closely followed by iron & steel products. Preserved food, plastics and man-made filament had
also shown remarkable growth during this period. Indian exports are presently valued at US $
1222 million and India is the 21
st
largest exporter of goods to Canada. It comprises just 0.43% of
Canadas global imports (was 0.38% in 2002).
The Canadian exports had declined by 3% globally but had shown a healthy growth of 7.5% to
India during January October 2003. In 2003, India was the 18
th
largest export destination of
Canadian goods. Paper and paperboard had shown massive growth of 136%, followed by aircraft
and inorganic chemicals.

MEXICO:
Indian exports to Mexico for the period January September 2003 were valued at US $ 398
million showing a positive growth of 22%, against the global Mexican import growth rate of
0.4%. Indias market share had risen to 0.32% up from 0.26% in 2002. Amongst the top 30
exporting countries to Mexico, only 8 had registered a growth of over 20% in their exports and
India was one of them.
Mexican exports to India had also grown substantially by 83% during the period January
September 2003 valued at US $ 318 million. Indias share in total Mexican exports was 0.26%
(up from 0.14% in 2002).



32

Recent Events & Future Prospects of NAFTA

The TTC:

The Trans-Texas Corridor (TTC) is no ordinary highway. The toll road would be four football
fields wide. It includes separate lanes(up to six for automobiles, four for large trucks), plus tracks
for freight trains, separate tracks for high-speed and commuter rail, also space for oil and gas
pipelines, electricity wires, and broadband transmission cables. The implications of this scheme
are staggering. Some experts say that up to a million people in Texas stand to lose their homes
and 584,000 acres of rich farm and ranchland are to be destroyed, all for a privately funded
highway.

Peru, Columbia & Panama

The Bush administration in 2007 created an agreement to extend the provisions and boundaries
of NAFTA to Peru, Columbia & Panama. They intended to fast track the approval with the
Senate & Congress. However, this has not yet happened to date leaving the number of countries
that are members of NAFTA at 3 founding members as of now.

The US Elections Obamas Position on NAFTA

During the US elections, both Democratic candidates i.e. Barack Obama as well as Hillary
Clinton, fiercely opposed NAFTAs provisions and made stringent promises to renegotiate the
agreement. However, today, President Obama seems to have taken a complete u-turn claiming
that not all the provisions of NAFTA are bad and there seems to be no reason to renegotiate the
agreement in a unilateral manner.

President Obama wants a trade policy that shifts the benefits of globalization more in favor of
labor, and argues that there are both economic and ethical considerations behind renegotiating
NAFTA. Doing so, he argues, would help level the playing field by making it easier to eliminate
practices like child labor and lax environmental regulation in foreign countries, both of which
put American workers at a disadvantage.

The Chapter 11 Provisions Debate
Fifteen years ago the North American Free Trade Agreement (NAFTA) entered into force and
became the first regional trade agreement between a developing country (Mexico) and two
developed nations (Canada and the United States of America). While a number of criticisms and
controversies have arisen with respect to different aspects of NAFTA, there can be little doubt
that one of the most contentious features of the agreement has been Chapter 11; a chapter which
contains obligations that each NAFTA Party must respect when dealing with the investors of
other NAFTA Parties and their investments.
From its inception, NAFTA Chapter 11 has drawn a number of concerns with respect to its scope
and operation. Some argue that the Chapter is overly protective of investors and, as a result,
33

inappropriately infringes on a states ability to regulate investment within its borders. Others
argue that the Chapter has had a positive influence on international investment law by, for
example, allowing for more transparent arbitration proceedings.
TPP: The logical progeny of NAFTA?
The Trans-Pacific Partnership (TPP) is a secretive, multi-nation trade agreement that threatens to
extend restrictive intellectual property laws across the globe.
The nine nations currently negotiating the TPP are the U.S., Australia, Peru, Malaysia, Vietnam,
New Zealand, Chile, Singapore, and Brunei Darussalam. However, Canada and Mexico has also
been invited to join the negotiations so it is very likely they will do so. The TPP will contain a
chapter on Intellectual Property (copyright, trademarks, patents and perhaps geographical
indications) that will have a broad impact on citizens rights, the future of the Internets global
infrastructure, and innovation across the world. A leaked version of the February 2011 draft U.S.
TPP Intellectual Property Rights Chapter [PDF] indicates that U.S. negotiators are pushing for
the adoption of copyright measures far more restrictive than currently required by international
treaties, including the controversial Anti-Counterfeiting Trade Agreement (ACTA).
The TPP will rewrite the global rules on IP enforcement. All signatory countries will be required
to conform their domestic laws and policies to the provisions of the Agreement. In the U.S. this
is likely to further entrench controversial aspects of U.S. copyright law (such as the Digital
Millennium Copyright Acts broad ban on circumventing digital locks and frequently
disproportionate statutory damages for copyright infringement) and restrict the ability of
Congress to engage in domestic law reform to meet the evolving IP needs of American citizens
and the innovative technology sector. The recently leaked U.S. IP chapter also includes
provisions that appear to go beyond current U.S. law. This raises significant concerns for
citizens due process, privacy and freedom of expression rights.


34

CONCLUSION
NAFTA, as a part of the package of economic reforms implemented in Mexico, helped to
produce an export boom, a rapid and strong increase in manufacturing exports, and an inflow of
much needed foreign direct investment accompanied by technology transfers. The fundamental
constraints on Mexicos long-term economic growth have not been alleviated, however. Some
have actually become more binding. NAFTAs positive impact may have by now reached a point
of exhaustion and the Agreement should be revamped. It has not been the success expected in
terms of economic growth or of job generation. The direct impact of exports on domestic output
was limited and offset by the rupture of backward linkages brought about by the massive inflow
of imported inputs; many of them required for export production. Mexico is thus at a crossroads.
It can no longer base its international competitiveness on low wages. But, at the same time, it has
not yet proven itself able to enter international markets based on knowledge-intensive, high
value-added processes and products. If Mexico is to succeed in its quest to achieve high and
sustained economic growth, there is an urgent need to rethink key elements of its overall trategy.
In particular, this may require new policies to promote innovation and technological
development, as well as a new wave of public investment to modernize and widen infrastructure.
It is also necessary and urgent to implement a policy directed to the generation of jobs in the
formal sector of the economy. Without fiscal reform, these initiatives are not feasible.

35

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