North American Free Trade Agreement: A Focus on the Substantive Issues

GAO discussed major issues associated with the North American Free Trade Agreement (NAFTA). GAO noted that: (1) NAFTA will reduce barriers to North American trade and investment such as tariffs, import licensing, and customs user fees; (2) under NAFTA, investors will gain nondiscriminatory treatment, freedom from performance requirements, free transfer of investment-related funds, expropriation based on international law, and international arbitration for NAFTA violations; (3) NAFTA has special provisions for sensitive economic sectors such as agriculture, automotive products, energy, and textiles and apparel; (4) NAFTA implementation mechanisms provide for dispute resolution, intellectual property rights protection, and temporary import protection when a domestic industry is threatened; (5) NAFTA impacts nontrade issues such as environmental protection, labor rights, wages, health and safety standards, and free movement of labor; (6) potential economic impacts include limited net gains in U.S. and Canadian economies, a large gain in the Mexican economy, uneven net employment gains, job dislocations among low-skilled workers, and the redirection of economic resources to more efficient and productive sectors; (7) Congress needs to expand and improve dislocated workers assistance programs; and (8) rejection of NAFTA could lead to adverse effects on U.S.-Mexican trade, illegal Mexican immigration, and Mexican financial markets.