NAFTA: Twelve years after

Despite arguments about specific portions of the North American Free Trade Agreement (NAFTA), signed in January 1994, it is generally agreed that its effects have benefited the three signatories — the U.S., Canada and Mexico.

"We have never wanted to reopen NAFTA," notes Andre Lemay of Canada's Department of Foreign Affairs and International Trade (www.facaec.gc.ca). "We have always agreed there are ways of enhancing NAFTA because it is a living document, and the Mexicans believe the same thing."

A veteran Canadian observer of the pact's operations, John Ferguson, general manager Canada of truckload carrier Schneider National Inc. (www.schneider.com), notes that all three countries have seen increased volumes of trade, and reflects on how problems and solutions under NAFTA have changed since it began. The first challenges, he notes, were not so much in Customs clearances and release, but more in documenting country of origin for products and their components.

"As volumes increased," notes Ferguson, "significant programs evolved, designed to expedite Customs release through electronic means. As trade grew, so did backups at the border. A number of programs put in place, like the Pre-Arrival Release System (PARS), are designed to expedite movement. Through the late 1990s and into early 2000, we were heading toward an open border concept. Then 9/11 hit and issues changed from trade efficiency to security, which brought a change in process and volumes of trade."

Petroleum, natural gas and electricity are major trade commodities between the U.S. and Canada, with Canada being the largest exporter of these energy products to the U.S. The automotive sector is another important vertical market for the two countries.

Lemay notes that during the course of the treaty, Canada's trade with Mexico has gone up considerably. "For example, in 1998 Canada exported to Mexico $1.5 billion in merchandise," he says. "In the same year, we imported from Mexico $7.7 billion. In 2003, Canada exported $2.2 billion in goods to Mexico. Imports from Mexico for 2003 were about $12.2 billion, about double the amount from the moment NAFTA was implemented."

The Office of the U.S. Trade Representative noted that exports to Mexico grew from $46.5 billion to $105.4 billion. Mexican exports to the U.S. reached more than $138 billion, while Mexican exports to Canada grew from $2.7 billion to $8.7 billion, an increase of almost 227%. During the period from 1993 to 2003, Mexico's economy grew by 30%.

Controversy remains for NAFTA partners. There are issues of Mexican drivers and trucks being allowed to work on U.S. roads, and the issue of softwood subsidies by the U.S. for its producers remains a major point of contention for Canada.

Despite these problems the success of the elder NAFTA presents an example of hope for trade for the younger CAFTA treaty (see cover story). As Lemay notes, "Overall NAFTA has been going very well. Like any trade relationship, there are ups and downs, but we feel the ups have been much greater than the downs and that this is going to continue."