Advantages of NAFTA

NAFTA created the world’s largest free trade area, linking 444 million people and producing $17 trillion in goods and services annually. Estimates are that NAFTA increases U.S. GDP by as much as .5% a year.

That's because it eliminates tariffs and creates agreements on international rights for business investors. This reduces the cost of trade, which spurs investment and growth especially for small businesses. Eliminating tariffs also reduces inflation by decreasing the costs of imports. (Source: USTR, Quantification of NAFTA Benefits)

Trade between the NAFTA signatories tripled, from $297 billion in 1993 to $1 trillion in 2007 (latest data available). Exports from the U.S. to Canada and Mexico grew from $142 billion to $452 billion.Exports from Canada and Mexico to the U.S. increased from $151 billion to $568 billion.One reason trade grew because NAFTA provided the ability for firms in member countries to bid on government contracts. It also protected intellectual properties.

NAFTA increased farm exports because it eliminated high Mexican tariffs. Mexico is the top export destination for beef, rice, soybean meal, corn sweeteners, apples and beans. It is the second largest for corn, soybeans and oils. As a result of NAFTA, the percent of U.S. agricultural exports to Canada and Mexico has grown from 22% in 1993 to 30% in 2007. (Source: USTR, NAFTA Facts, March 2008)

More than 40% of U.S. GDP is services, such as financial services and health care. These aren't easily transported, so being able to export them to nearby countries is important. NAFTA boosted U.S. service exports to Canada and Mexico from $25 billion in 1993 to $106.8 billion in 2007 (latest data available). Service exports were $40 billion.

NAFTA eliminated trade barriers in nearly all service sectors, which are often highly regulated. NAFTA requires governments to publish all regulations, lowering hidden costs of doing business.

The U.S. imported $157.8 billion in oil from Mexico and Canada (shale oil).This also reduces U.S. reliance on oil imports from the Middle East and Venezuela. It is especially important now that the U.S. no longer imports oil from . Why? Mexico is a friendly country, whereas Venezuela's president often criticizes the U.S. Both Venezuela and Iran have started selling oil in currencies other than the dollar, contributing to the decline in the dollar's value.

Since NAFTA eliminates tariffs, oil prices are lower. The same is true for food imports, which totaled $28.9 billion in 2008.

Since NAFTA was enacted, U.S. foreign direct investment (FDI) in Canada and Mexico more than tripled to $348.7 billion (as of 2007, latest data available). Canadian and Mexican FDI in the U.S. grew to $219.2 billion.

NAFTA reduces investors' risk by guaranteeing they will have the same legal rights as local investors. Through NAFTA, investors can make legal claims against the government if it nationalizes their industry or takes their property by eminent domain. (Source: USTR, NAFTA Section Index) (Updated December 21, 2009)