NAFTA stands for North American Free Trade Agreement. It is a trade agreement that was signed by the United States, Mexico and Canada. The agreement created a trilateral trade block that was rule-based in North America. It came into effect on 1 st January 1994. NAFTA had several objectives.
They are as follows:
Establishing a free trade in the area as per the stipulations of the agreement
Promote integration in the region via an instrument that would contribute to establishment of a Free Trade Area of the Americas commonly known as FTAA and eliminate investment and trade barriers progressively
Create economic development opportunities
- Eliminate trade barriers while facilitating cross-border goods movement between the parties’ territories
- Increase substantially the investment opportunities of involved parties
- Facilitate investment and trade services with an aim of deepening and developing the relations between parties of the agreement
- Promote conditions that are suitable for fair competition in a free trade region
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Establish the framework that would enhance further regional, multilateral and bilateral cooperation whole enhancing and expanding the benefits brought by the agreement
To create effective and efficient procedures for application and implementation of the agreement for the joint administration of the agreement and disputes resolution
The aim of NAFTA is to create trilateral trade bloc in North America. This entails liberalization of trade restrictions among the countries that are member to the agreement. Duty rates and tariff elimination were among the major factors that led to the establishment of the agreement. Products that qualify to Canada and Mexico are duty-free with this agreement in place. NAFTA was also aimed at promoting free competition conditions while increasing access to the market and investment opportunity in the trade area.
NAFTA had far reaching impact on the free trade in the North American countries. As a result, some tariffs were eventually phased out. Realization of the benefits of this agreement was almost immediate. Among the benefits realized include increased foreign investment, goods and services trade and creation of more jobs in the three countries.
NAFTA acted as a groundwork which led to establishment of more free trade agreements. This is because it considered the essence of having forms located within the NAFTA region and essence of intellectual property. The tribunal of transparent international also backed NAFTA allowing the governments to articulate their complaints and report violations that counter North American Free Trade Agreement.
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