NAFTA's Mission, Logistics and Outcomes: Two Decades of Success!
The acronym "NAFTA" is liberally employed by pundits, but what does the oft-repeated acronym actually mean and represent? The North American Free Trade Agreement came into effect in January of 1994 and effectively soldered together the economic potential of the United States, Canada and Mexico.
United We Stand
The idea behind the North American Free Trade Agreement was to create a tripartite trade bloc to help ensure the fiscal success of each constituent nation comprising the North American Free Trade Agreement. In fact, the North American Free Trade Agreement has two subsidiary wings - the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). This article will explore how NAFTA and its subsidiary wings have positively impacted North American trade over the last twenty years.
Once NAFTA came into existence nearly twenty years ago, open trade resoundingly fell into place as tariffs on certain goods were lifted. Trade has picked up between Mexico and the United States as Mexico has dutifully accepted NAFTA's clarion call for free trade. For instance, Mexico has noticed that agricultural trade between the United States and Mexico is essentially free of tariffs; accordingly, Mexico has increasingly exported corn and meat to the United States.
More Positive Changes
As late as 2010, Canada and Mexico were the top two consumers of United States' exports. Largely thanks to the North American Free Trade Agreement's trade facilitation between North American nations, Canada purchased approximately $250,000,000 in United States' goods in 2010; in the same fiscal year, Mexico purchased over $150,000,000 worth of products from the United States. Interestingly, since 2009 the United States has increased its annual exported worth to nearly half a trillion dollars per year!
The maquiladoras (IMMEX Program) in Mexico are manufacturing plants in free trade zones. Mexico manufacturing is impacted by maquiladoras in that maquiladoras are mostly tariff-free and domestically tax-exempt assembly, processing and manufacturing plants. In terms of manufacturing in Mexico, nearly 1.5 million Mexican workers are employed in Mexico's 3,000 maquiladoras. The IMMEX (maquiladora) program continues to expand and contribute to significant growth throughout the country, especially now that manufacturers are moving operations back to North America from China.
The North American Agreement on Environmental Cooperation outlines conservation principles and provisions to protect the North American environment and way of life. The North American Agreement on Environmental Cooperation and the United States Environmental Protection Agency (EPA) have sought to tightly regulate environmental damage accruing from maquiladoras in Mexico. Jose Luis Amelco, the Environmental, Health & Safety manager at North American Production Sharing, Inc. (NAPS), one the largest providers of outsourced administrative and compliance management services in all of Mexico stated, “Environmental compliance in Mexico is taken very seriously by the Mexican government and in many cases can be more challenging to manage than in the United States. It is important for foreign companies to understand the environmental laws in Mexico prior to expanding their operations and ensure the necessary permits are in place.”
Can Do Attitude
The North American Agreement on Labor Cooperation would like to see manufacturing in Mexico continue to flourish. With a large portion of Mexican labor and foreign investment married to Mexican maquiladoras, the NAAEC and NAALC are working in tandem to combat negative repercussions in an otherwise booming Mexican labor market.
The North American Free Trade Organization has opened up billions of dollars in revenue vis-a-vis US exports. Although Canada and Mexico are still the United States' biggest purchaser of goods, other nations are taking note of Mexico's commitment to affordable manufacturing and assembly!
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With over 20 years of experience doing business in Mexico, NAPS can provide expert commentary on trends and changes in the industry. NAPS offers administrative support services for companies manufacturing in Mexico. Administrative services include: Site Selection, HR, Recruitment, Accounting, Payroll, Customs, Environmental and Corporate Compliance. For more information contact NAPS at 858.794-7947 or visit our website.