Essay: North American Free Trade

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[. . .] These provisions help automotive producers in the U.S. To address member countries as a unitary market. This allows them to increase their efficiency while competitively addressing the international environment.

Other provisions ensured by NAFTA are applied to the textile and apparel sectors. This is the case of yarn forward rules of origin, and others. These provisions are intended to increase exports opportunities for textiles and apparel producers in the U.S.

3. U.S. -- Mexico Trade Relationships

The North American Free Trade Agreement has significantly influenced relationships between the U.S. And Mexico, and it also provides important opportunities for economic development on public and private level. The trade and investments activities between these countries have been improved due to the agreement. The set of trade rules created by NAFTA have reduced the barriers between Mexico and the U.S., strengthening markets in these countries.

In order to understand the effects that NAFTA has on the U.S. And Mexico, it is important to analyze some of the facts regarding their trade relationship. The products exported and imported between the U.S. And Mexico totaled $500 billion in 2011. The value of exports reached $224 billion. The value of imports reached $277 billion. The U.S. trade deficit with Mexico was $53 billion in 2011.

Mexico is U.S.'s 3rd largest trade partner with $494 billion in total trade during 2012. The value of exports reached $216 billion (USTR, 2014). The value of imports reached $278 billion. The U.S. trade deficit with Mexico was $61 billion in 2012.

Some interesting facts about the U.S. -- Mexican trade relationship also apply to services. Traded services between the U.S. And Mexico reached $39 billion in 2011. Of these, exported services reached $25 billion. Imported services reached $14 billion. The U.S. services trade surplus with Mexico was $11 billion in 2011.

4. U.S. Exports to Mexico

Regarding exports, Mexico represents an important partner for the United States, and it ranks 2nd largest goods export market in 2012. This situation can be attributed to NAFTA. In addition to this, other market opportunities have determined this situation.

The U.S. exports to Mexico in 2012 reached $216.3 billion, a 9.1% ($18.0 billion) increase from 2011, and a 121.9% from 2002. It has increased 420% since before establishing NAFTA. U.S. exports to Mexico represented 14.0% of all U.S. exports in 2012.

The most exported products in 2012 were: machinery ($36.0 billion), electrical machinery ($34.0 billion), mineral fuel and oil ($23.8 billion), vehicles ($20.4 billion), and plastic ($13.9 billion). In the case of agricultural products, U.S. exports to Mexico reached $18.9 billion in 2012, making Mexico the 3rd largest U.S. agricultural products exports market. The most exported categories of agricultural products are: coarse grains ($3.0 billion), red meats, fresh/chilled/frozen ($1.9 billion), and soybeans ($1.9 billion), dairy products ($1.2 billion), and wheat ($1.1 billion).

Regarding the U.S. exports of private commercial services to Mexico, these reached $25.2 billion in 2011, a 4.6% ($1.1 billion) increase from 2010 and 62% greater than 2000. It has increased 142% from before NAFTA was established. The other private services (business, professional, and technical services and financial services), and the travel categories represented most of U.S. services exports to Mexico.

5. U.S. Imports from Mexico

Mexico is United States 3rd largest supplier of imported products in 2012. The products imported by the U.S. from Mexico reached $277.7 billion in 2012, a 5.6% ($14.8 billion) increase from 2011, and a 106.3% increase from 2002. It has increased 596% since before NAFTA was established. U.S. imports from Mexico represented 12.2% of all U.S. imports in 2012.

The most imported categories of products in 2012 were: electrical machinery ($56.8 billion), vehicles (cars, trucks and parts) ($53.5 billion), machinery ($42.3 billion), mineral fuel and oil (crude) ($39.9 billion), and optic and medical instruments ($10.4 billion).

The imported agricultural products from Mexico by the U.S. reached $16.4 billion in 2012, making Mexico the 2nd largest U.S. supplier. The most imported categories of agricultural products are: fresh vegetables ($4.0 billion), fresh fruit (excluding bananas) ($2.7 billion), wine and beer ($1.8 billion), and snack foods (including chocolate) ($1.5 billion).

The U.S. imports of private commercial services from Mexico reached $13.7 billion in 2011, a 1.5% ($202 million) increase from 2010, and a 28% increase from 2000. It has increased 85% since before NAFTA was established. Travel and other private services (business, professional and technical services) accounted for most of U.S. services imports from Mexico in 2011.

6. U.S. -- Mexico Trade Balance

Another important indicator of the trade relationship between the U.S. And Mexico is represented by their trade deficit. The U.S. trade deficit with Mexico reached $61.3 billion in 2012, a 4.9% reduction ($3.2 billion) since 2012. The U.S. trade deficit with Mexico represented 8.4% of the total U.S. trade deficit in 2012. The United States had a services trade surplus of $11.5 billion with Mexico in 2011, an 8.6% increase from 2010.

7. Investments between the U.S. And Mexico

U.S. foreign direct investment (FDI) in Mexico reached $91.4 billion in 2011 an 8.4% increase from 2010. U.S. FDI in Mexico is mostly represented by the manufacturing, nonbank holding companies, and finance/insurance sectors. Mexican FDI in the United States reached $13.8 billion in 2011, a 22.2% increase from 2010. Mexican direct investment in the U.S. mostly refers to the manufacturing and wholesale trade sectors. Sales of services in Mexico by U.S. companies reached $34.4 billion in 2010, and sales of services in the United States by Mexican companies reached $4.8 billion.

8. NAFTA Advantages

The North American Free Trade Agreement has significantly influenced the economies of the U.S., Canada, and Mexico, companies in these countries, but also relationships between them. The reduction of most barriers between these countries has allowed their companies to successfully address the important market opportunities they provided. In addition to economic development, the free trade agreement has also developed the labor market in these countries.

There are numerous advantages that the North American Free Trade Agreement has produced. Some of the most important benefits refer to increasing trade in most products and services, increased the U.S. agricultural products exports, and created trade surplus in services. In addition to this, it helped reduce oil and grocery prices, and it increased foreign direct investments.

The most important effect that NAFTA has on the U.S., Canada, and Mexico is that it reduced tariffs between these countries. This means that the cost of products imported between these countries is reduced. Therefore, reduced costs of products determine reduced inflation, which is one of the most important advantages of NAFTA. This is a benefit that produces effects on several levels. The national economies of these countries benefit because of increase imports and exports in the region, companies in these countries benefit because they can expand their business on international level, and individuals benefit from reduced prices of products.

Another important benefit produced by NAFTA is represented by the fact that it creates agreements on international rights for business investors. In other words, business investors benefit from an environment that allows them to invest in markets they are interested in. This objective can be reached by reducing the cost of trade associated with agreements on international rights of these investors (Amadeo, 2012). This allows them to increase their level of investments and develop their business. This is mostly the case of smaller businesses that require governmental support.

NAFTA also allows companies in member countries to bid on government contracts. This is an important issue because government contracts can present numerous benefits to the companies that they are attributed to. These contracts are very expensive and they can represent an important business for bidding companies. In addition to this, bidding on these contracts means serious advertising. Such contract bids are under press scrutiny, so companies that bid on them are brought to the public space. In the companies that win government contracts, this means that they also receive great credibility. This is because the conditions established by governments that must be met by these companies are very strict.

Another important issue associated with NAFTA benefits is represented by the fact that this trade agreement protects intellectual properties. This is a very important factor that influences trade relationships between countries. In addition to this, it ensures a business environment that favors technology advancement and innovation.

One of the benefits of NAFTA that is reflected on national, company, and individual level is represented by the fact that it has increased trade levels in most products industries. Trade between the NAFTA member countries has more than quadrupled, from $297 billion in 1993 to $1.6 trillion in 2009. Exported products levels from the U.S. To Canada and Mexico grew from $142 billion to $452 billion in 2007, and reduced to $397 billion in 2009, because of the financial crisis. Exports from Canada and Mexico to the U.S. increased from $151 billion to $568 billion in 2007, and reduced to $438 billion in 2009.

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North American Free Trade.  (2014, April 29).  Retrieved June 26, 2019, from https://www.essaytown.com/subjects/paper/north-american-free-trade/9066162

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"North American Free Trade."  Essaytown.com.  April 29, 2014.  Accessed June 26, 2019.
https://www.essaytown.com/subjects/paper/north-american-free-trade/9066162.