NAFTA. It's one of the most important agreements in place on the continent. But what's all the fuss about and why has it become such a buzzword?
Since 2016, US President Donald Trump has brought it up regularly, calling for a complete overhaul of the deal, arguing that it's the "worst trade deal maybe ever signed anywhere, but certainly ever signed in this country."
This position has forced Canada and Mexico to come to the table, although with a more tempered attitude, in an effort to modernize the deal.
So here we are, 23 years later, renegotiating arguably one of the most vital agreements amongst the three nations.
But what is NAFTA anyway?
For starters, the North American Free Trade Agreement (NAFTA) is a trade deal between Canada, the United States, and Mexico that first came into effect in 1994. It was signed by Canadian Prime Minister Brian Mulroney, Mexican President Carlos Salinas, and U.S. President George H.W. Bush. NAFTA replaced the Canada-US Trade Agreement, which was signed in 1988. The primary aim of the deal was to govern the exchange of goods and services traded between the three nations by removing most tariffs (taxes) on trade. It also applies to cross-border investment, government contract bids, and dispute resolution procedures.
The rationale in forming the agreement was to encourage trade between the three countries by boosting economic growth by lowering taxes, making goods cheaper, and creating more jobs. And it worked: overall trade among all three countries increased from $290 billion in 1993 to $1.1 trillion in 2016. To put it in context, this trade has resulted in the NAFTA partners representing 28% of the world's gross domestic product in 2016, even though the three countries form only 7% of the world's population.
So why the need for renegotiation?
In short, because of President Trump. The renegotiation of NAFTA was a cornerstone of his presidential campaign and he continues to promise to either make a better agreement or kill the whole thing.
He is not, however, the first American politician to push for reform. Since its inception, there has been American criticism of the deal. Ross Perot, business magnate and former presidential candidate, claimed NAFTA would produce a "giant sucking sound [of jobs] going south" and that America has "wrecked the country with these kind of deals."
From an American perspective, NAFTA did make it easier for US companies to move their businesses to Mexico, where labour is...