Advantages of NAFTA

What Are the Advantages of NAFTA?:

NAFTA created the world’s largest free trade area, linking 439 million people and producing $15.3 trillion in goods and services annually. Estimates are that NAFTA will increase U.S. GDP by between .1% - .5%.

That's because its elimination of tariffs and agreements on international rights for business investors increases trade and capital, spurring business growth. Elimination of tariffs also reduces inflation, by decreasing costs of imports. (Source: USTR, Quantification of NAFTA Benefits, NAFTA - A Success for Trade)

Increase in Trade:

Trade between the NAFTA signatories tripled, from $297 billion in 1993 to $903 billion in 2007. Specifically,

• U.S. goods exports to Canada and Mexico grew 157%, from $142 billion to $364.6 billion.
• Exports from Canada and Mexico to the U.S. grew 231%, from $151 billion in to $501 billion.

NAFTA provides the ability for firms in member countries to bid on government contracts. It also protect intellectual properties.

Increase in Trade of Services:

More than 40% of U.S. GDP is services, including financial services and health care. These aren't as easily transported as are goods, so being able to expand services to nearby countries is important. Thanks to NAFTA, U.S. services exports to Canada and Mexico grew 125%, from $25 billion to $62 billion in 2006. Services exports from Canada and Mexico grew to $37 billion.

NAFTA eliminates trade barriers in nearly all service sectors. Service industries are often highly regulated, and the regulations aren't always apparent. NAFTA requires authorities to use open administrative procedures and publish all regulations.

Increase in Foreign Direct Investment:

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico tripled to $331 billion (as of 2006, latest data available). Canadian and Mexican FDI in the U.S. was $165 billion.

NAFTA reduces risk for investors by guaranteeing they will have the same legal rights as local investors. It also guarantees they will receive fair market value for their investments in case the government decides to nationalize the industry or take the property by eminent domain. NAFTA provides a legal mechanism for investors to make claims against a government, if needed. (Source: USTR, NAFTA Analysis 2007)