UK Accounting Glossary
NAFTA is an acronym for the North American Free Trade Agreement.
NAFTA (North American Free Trade Agreement) is a comprehensive free trade accord inaugurated in 1994 among United States, Canada, and Mexico.
North American Free Trade Agreement (NAFTA) can be referred to as a trade bloc initiated by Government of North America, which includes countries like the United States, Canada, and Mexico. North American Free Trade Agreement was implemented from January 1, 1994. The main purpose of this agreement was to remove restrictions on trade between three major nations of North America- United States, Canada, and Mexico.
A major objective of the North American Free Trade Agreement can be said to be the elimination of all type of non-tariff restrictions associated with agricultural trade between the United States and Mexico. Several tariffs were eradicated at once and few others were eliminated in a time of 5 to 15 years. Main purpose of this type of agreement was to impose an orderly adjustment so that free trade could be practiced with Mexico. In 1989, U.S.-Canada Free Trade Agreement was also incorporated in North American Free Trade Agreement. Under this agreement, all tariffs associated with agricultural trade between the United States and Canada were removed. Few items that were covered by tariff-rate quotas were however exempted.
Mexico and Canada got into another bilateral North American Free Trade Agreement that dealt with market access for several types of agricultural products. This Mexico and Canada trade agreement succeeded in eliminating most tariffs instantly and over 5, 10, or 15 years. Major agricultural products taken into account in this agreement were dairy, poultry, eggs, and sugar.
North American Free Trade Agreement also includes the North American Agreement on Environmental Cooperation and the North American Agreement on Labor Cooperation. North American Agreement on Environmental Cooperation (NAAEC) was an agreement on environmental regulations. Most environmentalists were concerned that the United States would lower its standards if the other three nations did not attain steady environmental guideline. NAAEC compels parties to implement their own environmental laws. North American Agreement on Labor Cooperation intended to create a foundation of a cooperative movement between nations in order to resolve various type of labour problems. This was implemented to promote better cooperation among trade unions and social organizations to develop labour conditions.
NAFTA called for the immediate elimination of duties on about half of all U.S. goods shipped to Mexico and a gradual phase-out of other tariffs over a period of about 14 years. The debate on NAFTA was vigorous. Large corporations tended to support NAFTA, while U.S. and Canadian trade unions were against NAFTA; opposition to NAFTA also came from environmental and social advocacy groups. The NAFTA debate culminated in a memorable face-off on TV between (pro-NAFTA) Vice President Al Gore and (anti-NAFTA) third-party Presidential candidate Ross Perot. In the end, NAFTA passed in the U.S. House of Representatives by a vote of 234 to 200, while the Senate tally was 61-38. The debate on the effects of NAFTA in the years after implementation was lively as well. Many observers agreed that it was difficult to isolate the impact of NAFTA from the numerous other factors that affect North American trade.
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This glossary post was last updated: 7th February 2020.