What was the North American Free Trade Agreement (NAFTA)?
Answer
The trade agreement among Canada, the United States, and Mexico in force from January 1, 1994 to June 30, 2020, replaced by CUSMA on July 1, 2020.
Explanation
The North American Free Trade Agreement (NAFTA) was the trade agreement among Canada, the United States, and Mexico that came into force on January 1, 1994 and was replaced on July 1, 2020 by the Canada-United States-Mexico Agreement (CUSMA). NAFTA created the largest free-trade area in the world by GDP at the time of its signing, eliminating most tariffs and quotas on goods traded among the three countries and integrating supply chains across the continent.
NAFTA was signed in San Antonio, Texas on December 17, 1992 by Prime Minister Brian Mulroney, U.S. President George H.W. Bush, and Mexican President Carlos Salinas de Gortari. The agreement built on the Canada-United States Free Trade Agreement of 1989 and added Mexico to the framework. President Bill Clinton secured U.S. ratification through side-agreements on labour and environmental cooperation. Prime Minister Jean Chrétien's Liberal government implemented the agreement on the Canadian side after the 1993 election.
NAFTA's economic effects were substantial and contested. Trade among the three countries grew from US$290 billion in 1993 to over US$1.2 trillion by 2018. Canadian merchandise exports to the United States rose from US$117 billion to US$300 billion over the same period. Canadian auto, energy, and resource sectors expanded; Canadian manufacturing employment in labour-intensive sectors fell as some production shifted to Mexico. Investment flows into Canada from the United States and Mexico increased.
Renegotiation began in August 2017 at U.S. President Donald Trump's request and concluded with the signing of CUSMA on November 30, 2018. CUSMA preserves most NAFTA provisions but tightens automotive content rules, updates digital trade and intellectual property, includes enforceable labour value content rules, opens 3.6 per cent of the Canadian dairy market to U.S. producers, eliminates investor-state dispute settlement between Canada and the United States, and includes a six-year sunset review. CUSMA entered into force on July 1, 2020, ending NAFTA's 26-year run.
Why this matters for your test
NAFTA reshaped Canada's economy for a generation. Recognising the January 1, 1994 entry into force and the July 1, 2020 replacement by CUSMA gives candidates the trade-policy chronology that organises the modern Canadian economy.
Source: Global Affairs Canada; Department of Finance Canada
