Mexico’s Free Trade Agreements

[Excerpt] Mexico has had a growing commitment to trade integration through the formation of free trade agreements (FTAs) since the 1990s and its trade policy is among the most open in the world. Mexico\u27s pursuit of FTAs with other countries not only provides economic benefits, but could also potentially reduce its economic dependence on the United States. The United States is, by far, Mexico\u27s most significant trading partner. About 80% of Mexico\u27s exports go to the United States and 49% of Mexico\u27s imports come from the United States. Mexico\u27s second largest trading partner is China, accounting for approximately 6% of Mexico\u27s exports and imports. In an effort to increase trade with other countries, Mexico has a total of 11 trade agreements involving 41 countries. These include agreements with most countries in the Western Hemisphere including the United States and Canada, Chile, Costa Rica, Nicaragua, Guatemala, El Salvador, and Honduras. In addition, Mexico has negotiated FTAs outside of the Western Hemisphere and entered into agreements with Israel and the European Union in July 2000. Mexico also has an FTA with Japan. The large number of trade agreements, however, has not yet been successful in decreasing Mexico\u27s dependence on trade with the United States. Economic motivations are generally the major driving force for the formation of free trade agreements among countries, but there are other reasons countries enter into FTAs, including political and security factors. One of Mexico\u27s primary motivations for the unilateral trade liberalization efforts of the late 1980s and early 1990s was to improve economic conditions in the country, which policymakers hoped would lead to greater investor confidence and attract more foreign investment. Trade agreements were also expected to improve investor confidence, attract foreign investment, and create jobs. Mexico may have other reasons for entering into FTAs, such as expanding market access and decreasing its reliance on the United States as an export market. The slow progress in multilateral negotiations may also contribute to the increasing interest throughout the world in regional trade blocs. Some countries may see smaller trade arrangements as building blocks for multilateral agreements. Since Mexico began trade liberalization in the early 1990s, its trade with the world has risen rapidly, with exports increasing more rapidly than imports. Mexico\u27s trade balance with all countries went from a deficit of $13.5 billion in 1993 to surpluses of$7.1 billion in 1995 and $6.5 billion in 1996. Since 1998, Mexico\u27s trade balance has remained in deficit, reaching$17.5 billion in 2008. The trade balance with the United States went from a deficit of $2.4 billion in 1993 to a surplus of$82.0 billion in 2008. Exports to the United States increased 447% between 1993 and 2008, from $42.9 billion to$292.6 billion. Mexico\u27s imports from the United States increased 237% during the same time period, from $45.3 billion to$152.6 billion. In the 110th Congress, issues of concern related to the trade and economic relationship with Mexico involved mostly economic conditions in Mexico, issues related to the North American Free Trade Agreement (NAFTA), the effect of NAFTA on Mexico, and Mexican migrant workers in the United States. The 111th Congress will likely maintain an active interest concerning Mexico on these issues. This report provides an overview of Mexico\u27s free trade agreements, its motivations for trade liberalization and entering into free trade agreements, and some of the issues Mexico faces in addressing its economic challenges. This report will be updated as events warrant

NAFTA Renegotiation and Modernization

The 115th Congress faces policy issues related to the Trump Administration’s renegotiation and modernization of the North American Free Trade Agreement (NAFTA). NAFTA negotiations were first launched in 1992 under President H. W. Bush, who signed the agreement in December 1992, and continued under President Bill Clinton, who negotiated additional side agreements on labor and the environment. President Clinton signed the agreement into law on December 8 1993, (P.L. 103-182) and NAFTA entered into force on January 1, 1994. It is particularly significant because it was the most comprehensive free trade agreement (FTA) negotiated at the time, contained several groundbreaking provisions, and was the first of a new generation of U.S. FTAs later negotiated. Congress played a major role during its consideration and, after contentious and comprehensive debate, ultimately approved legislation to implement the agreement. NAFTA established trade liberalization commitments that set new rules and disciplines for future FTAs on issues important to the United States, including intellectual property rights protection, services trade, dispute settlement procedures, investment, labor, and the environment. NAFTA’s market-opening provisions gradually eliminated nearly all tariff and most nontariff barriers on goods produced and traded within North America. At the time of NAFTA, average applied U.S. duties on imports from Mexico were 2.07%, while U.S. businesses faced average tariffs of 10%, in addition to nontariff and investment barriers, in Mexico. The U.S.-Canada FTA had been in effect since 1989. Trade among NAFTA partners has tripled since the agreement entered into force, forming a more integrated North American market. The Trump Administration has made NAFTA renegotiation and modernization a prominent initial priority of its trade policy. President Trump has viewed the agreement as the “worst trade deal,” and has stated that he may seek to withdraw from the agreement. He has focused on the trade deficit with Mexico as a major reason for his critique. On May 18, 2017, the Trump Administration sent a 90-day notification to Congress of its intent to begin talks to renegotiate NAFTA, as required by the 2015 Trade Promotion Authority (TPA) (P.L. 114-26). Negotiations started August 16, 2017. Stating they are committed to an expeditious process, negotiators plan to have a series of seven rounds at three-week intervals for a conclusion by the end of 2017 or early 2018. The fourth round of negotiations began at the time this report was printed. The final text of the agreement will not be released until after negotiations are concluded. NAFTA parties have agreed that the information exchanged in the context of the negotiations, such as the negotiating text, proposals of each government, and other materials related to the substance of the negotiations, must remain confidential. Congress will likely continue to be a major participant in shaping and potentially considering an updated NAFTA. Key issues for Congress in regard to the renegotiation or modernization include the constitutional authority of Congress over international trade, its role in revising or withdrawing from the agreement, the U.S. negotiating objectives, the impact on U.S. industries and the U.S. economy, the negotiating objectives of Canada and Mexico, and the impact on broader relations with Canada and Mexico. The outcome of these negotiations will have implications for the future direction of U.S. trade policy under President Trump. NAFTA renegotiation may provide opportunities to address issues not covered in the original text. Technology and industrial production processes have changed significantly since it was negotiated. The widespread use of the Internet has affected economic activities and the use of e-commerce, for example. A modernization could incorporate elements of more recent U.S. FTAs, such as digital and services trade and enhanced IPR protection. Many U.S. manufacturers, services providers, and agricultural producers oppose efforts to eliminate NAFTA and ask that the Trump Administration strive to “do no harm” in the negotiations because they have much to lose if the United States pulls out of the agreement. Other groups contend that NAFTA should be rewritten to include stronger and more enforceable labor protections, provisions on currency manipulation, and stricter rules of origin

The North American Free Trade Agreement (NAFTA)

[Excerpt] The North American Free Trade Agreement (NAFTA) has been in effect since January 1, 1994. NAFTA was signed by President George H. W. Bush on December 17, 1992, and approved by Congress on November 20, 1993. The NAFTA Implementation Act was signed into law by President William J. Clinton on December 8, 1993 (P.L. 103-182). NAFTA continues to be of interest to Congress because of the importance of Canada and Mexico as trading partners, and because of the implications NAFTA has for U.S. trade policy under the Administration of President Donald J. Trump. During his election campaign, President Trump stated his desire to renegotiate NAFTA and that he would examine the ramifications of withdrawing from the agreement once he entered into office. He has also raised the possibility of imposing tariffs or a border tax on products from Mexico. This report provides an overview of North American market-opening provisions prior to NAFTA, provisions of the agreement, economic effects, and policy considerations

NAFTA at 20: Overview and Trade Effects

[Excerpt] The North American Free Trade Agreement (NAFTA) has been in effect since January 1, 1994. Signed by President George H.W. Bush on December 17, 1992, and approved by Congress on November 20, 1993, the NAFTA Implementation Act was signed into law by President William J. Clinton on December 8, 1993 (P.L. 103-182). NAFTA continues to be of interest to Congress because of the importance of Canada and Mexico as U.S. trading partners, and also because of the implications NAFTA has for U.S. trade policy. This report provides an overview of North American trade liberalization before NAFTA, an overview of NAFTA provisions, the economic effects of NAFTA, and policy considerations

Trade Preferences: Economic Issues and Policy Options

[Excerpt] Since 1974, Congress has created multiple trade preference programs designed to foster economic growth, reform, and development in less developed countries. These programs give temporary, non-reciprocal, duty-free U.S. market access to select exports of eligible countries. Congress conducts regular oversight of these programs, repeatedly revising and extending them. Two major issues face the 111th Congress: (1) the expiration of two preference programs by December 31, 2010; and (2) possible legislative action on broader reform of the preference programs based on comprehensive reviews in hearings held in both the House and the Senate earlier in this Congress. This report discusses the major U.S. trade preference programs, their possible economic effects, stakeholder interests, and legislative options

The North American Free Trade Agreement (NAFTA)

[Excerpt] The North American Free Trade Agreement (NAFTA) has been in effect since January 1, 1994. Signed by President George H. W. Bush on December 17, 1992, and approved by Congress on November 20, 1993, the NAFTA Implementation Act was signed into law by President William J. Clinton on December 8, 1993 (P.L. 103-182). NAFTA continues to be of interest to Congress because of the importance of Canada and Mexico as U.S. trading partners, and also because of the implications NAFTA has for U.S. trade policy. This report provides an overview of North American trade liberalization before NAFTA, an overview of NAFTA provisions, the economic effects of NAFTA, and policy considerations.CRS_The_North_American_Free_Trade_Agreement.pdf: 3044 downloads, before Oct. 1, 2020

U.S. Trade Concepts, Performance, and Policy: Frequently Asked Questions

[Excerpt] Congress plays a major role in U.S. trade policy through its legislative and oversight authority. There are a number of major trade issues that are currently the focus of Congress. For example, bills were introduced in the 113th Congress to reauthorize Trade Promotion Authority (TPA), the U.S. Generalized System of Preferences (GSP), and the U.S. Export-Import Bank. Congress has also been involved with proposed free trade agreements (FTAs), including the Trans-Pacific Partnership (TPP) involving the United States and 11 other countries and the Transatlantic Trade and Investment Partnership (TTIP) between with United States and the European Union (EU). Also of interest to Congress are current plurilateral negotiations for a Trade in Services Agreement (TISA) and a new multilateral Information Technology (ITA) agreement in the World Trade Organization (WTO). Trade and investment policies of major U.S. trading partners (such as China), especially when they are deemed harmful to U.S. economic interests, are also of continued concern to Congress. Events in the Ukraine have prompted U.S. trade sanctions against Russia. The costs and benefits of trade to the U.S. economy, firms, workers, and constituents, and the future direction of U.S. trade policy, are hotly debated topics in Congress. This report provides information and context for these and many other trade topics. It is intended to assist Members and staff who may be new to trade issues. The report is divided into four sections in a question-and-answer format: trade concepts; U.S. trade performance; formulation of U.S. trade policy; and trade and investment issues. Additional suggested readings are provided in an appendix.CRS_US_Trade_Concepts_Performance_and_Policy2.pdf: 180 downloads, before Oct. 1, 2020