History of NAFTA/ CAFTA

History of NAFTA/ CAFTA



History of NAFTA/ CAFTA


            The North American Free Trade Agreement (NAFTA) is an accord between the United States of America, Canada and Mexico. It was brought into force on 1 January 1994 after implementation legislation had passed on each constituent nation (Waller and Emmelhainz, 2007). The agreement created the largest are of free trade in the world by linking 450 million people in the three countries while facilitating production of $17 trillion worth of both goods and services. The purpose of the trade agreement was to enhance free movement of any type of goods and respective services between the three countries. It was signed by the representative Presidents in December 1992. Side agreements on the labor (North American Agreement on Labor Cooperation) and environment (North American Agreement on Environmental Cooperation) were instituted in the year 1993. Mexico pursued a further bilateral agreement with the US on environmental cooperation known as border Environmental Cooperation Agreement.

            The agreement consisted of a free trade commission, which consists of cabinet ministers and their designees from the three countries. The preceding attempt by Canada and US agreement was used to define the roles and implementation structures of the agreement. The mandate of the commission was to give oversight and provide direction to the working groups, committees and implementation bodies of the accord. According to the terms of agreement, the commission holds meetings at least annually (Waller and Emmelhainz, 2007). For matters that affected disputes and resolutions together with provision of administrative support, a secretariat was instituted (Malkin, 2012). This would be achieved through review panels. In order to ensure efficiency in the member participation and regular reviews, primary documents and implementation acts were enhanced. Under the side agreements between two or all three-member countries, serious environmental and labor issues are handled especially with the border region concerns.  


            The Central American Free Trade Agreement was instituted between United States of America and five countries from Central America namely Honduras, El Salvador, Nicaragua, Costa Rica and Guatemala. It was established in 28 May 2004. The purpose of the agreement was establishment of a free tariff area that allowed movement and exchange of goods and services in the respective six countries. Initially, the US had entered into talks and subsequent agreement with the Dominican Republic on separate talks of trade liberalization. The country was included into CAFTA on August 2004 (Jacksonville, 2005). The agreement was faced by pros and cons especially in ratification and implementation stages of the accord (Waller and Emmelhainz, 2007). Some constituent countries had to alter constitutions and some domestic laws in a hurried manner to coincide with the agreements stipulations.   

            Contentious issues among the nations have been on the industrial or intellectual property, protection accorded to investors who are non-statesmen, environment and labor. In many of the signatory countries, objection of the agreement has been widespread. This is exemplified by ratification of Costa Rica in 2006 (Jacksonville, 2005). The Dominican Republic has not yet set an implementation date. In some instances, additional requirements, which were not there in the first place, have been included for some of the signatory countries to meet. Some of the agreement’s primary commissions include Free Trade Commission, Committee on Trade Capacity Building, Labor and Environment (Waller and Emmelhainz, 2007). In the matters concerning disputes and solutions, the signatory countries are advised to resolve them through consultations and cooperation before using formal avenues for complaints. Implementation Acts and Primary Documents are retained by the constituent countries, with provisions for references.


Jacksonville, R. (2005). First NAFTA, now CAFTA Poses Threat To Overseas Workers. The Business Journals, pp. 1-2.

Malkin, E. (2012). Mexico Finds Unlikely Allies in Trade Fight. New York Times, pp.1-3.

Waller, G. & Emmelhainz, M. (2007). The North American Free Trade Agreement: Strategic Implications for Logistics Management. The International Journal of Logistics Management, Vol. 6, Iss. 1, pp. 1-12.

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