The North American Free Trade Agreement (NAFTA) is a free trade agreement between Canada, the United States (US), and Mexico. NAFTA was built on the Canada-US Free Trade Agreement (CUSFTA), which was brought into force in 1989 and superseded by NAFTA in 1994. Designed to eliminate trade and investment barriers between the three countries, the agreement came into force on 1 January 1994. In addition to being one of the most ambitious trade agreements in history, NAFTA also created the world’s largest free trade area. Since 1994, NAFTA has generated economic growth and rising standards of living for the people of all three member countries.
Under NAFTA, tariffs on all covered goods traded between Canada and Mexico were eliminated in 2008. In 2015, NAFTA represented 28% of the world’s gross domestic product, which amounts to a combined total of US$20.7 trillion in trade despite having less than 7% of the world’s population. Over the nearly three decades of NAFTA and the CUSFTA, Canada’s agri-food exports have grown by more than five-fold, from under $10 billion in 1988 to $56 billion in 2016. Together, the United States and Mexico account for more than half of these exports.
NAFTA serves as an institutional cornerstone to agri-food trade in North America and has been very good for Canada, the United States, and Mexico. Canada is among the top five suppliers of in eight of ten of the United States’ top agri-food food imports, and is the a top supplier in nine of ten of Mexico’s top agri-food imports. Since the adoption of NAFTA, US agri-food exports to Canada and Mexico have more than quadrupled from $8.9 billion in 1994 to $38.6 in 2015.
While Canadian agri-food exporters have largely benefited from NAFTA, there are areas in which NAFTA could be improved. Renegotiation should not allow new tariffs, new non-tariff barriers, or any other provisions that could be used to limit trade. A successful modernization of NAFTA could serve as a model agreement that can be used by the partners to promote trade liberalization in other multilateral and plurilateral negotiations.
Negotiations to modernize NAFTA began in August 2017 and are ongoing.