North American Free Trade Agreement (NAFTA) was a pact that united Canada, Mexico, and the United States in one of the world’s largest free trade zones . It built upon a free trade agreement between the United States and Canada that entered into force in 1989. NAFTA took effect in January 1994.
Under NAFTA, tariffs on most goods produced and sold in North America were gradually eliminated over 10 years. Trade of a few additional products was restricted for another 5 years. The first tariff reductions took place in 1994, and almost all tariffs were eliminated by 2008. NAFTA also established rights and obligations regarding trade in services, intellectual property, and international investment.
NAFTA generated extensive opposition in the United States because of concerns that it would result in a loss of U.S. jobs. Opponents feared the job losses would result from increased Mexican imports and from a shift in U.S. production to Mexican plants. Environmental groups feared NAFTA would increase air and water pollution, particularly in the U.S.-Mexican border region.
In response to opposition to the pact in the United States, the three countries agreed in 1993 to supplement NAFTA with three side agreements. These side agreements established commissions to monitor developments related to environmental and labor issues and to help solve problems triggered by the expansion of regional trade and investment.
In 2017, U.S. President Donald Trump announced plans to renegotiate NAFTA in order to reduce trade deficits with Mexico and Canada and boost U.S. automobile production. In 2018, Trump, Canadian Prime Minister Justin Trudeau, and Mexican President Enrique Peña Nieto signed an updated version of NAFTA that the U.S. government called the United States-Mexico-Canada Agreement (USMCA). This pact, which replaced NAFTA in 2020, maintained the largely tariff-free trade zone that NAFTA had established. It also included new rules regarding automobile manufacturing, digital trade, the environment, and intellectual property protections, and introduced stronger protections for workers, among other provisions.
