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Pros NAFTA Decreased TariffsA tariff is a tax that a national government places on an imported or exported good or service to encourage or discourage trade. Tariffs increase costs for consumers, which in turn discourages consumption of those items. One of the most common reasons governments impose tariffs is to "protect" domestic companies from cheaper foreign competitors. Tariffs can also be used to retaliate against a trading partner's own tariffs or to express disapproval of a country's foreign policy.
The decreased trade restrictions brought about by NAFTA have made it easier for Americans to purchase Canadian and Mexican goods. As of 2010, the most recent year for which these data were available, the United States received about a quarter of its imports from these two countries, which are its second and third largest suppliers of imported goods. In particular, the U.S. gets much of its crude oil, vehicles, machinery and gold from these two countries, as well as fresh produce, snack foods, live animals, red meat and chilled and frozen foods.
NAFTA Increased Trade Between the U.S., Mexico and CanadaNAFTA is credited with significantly increasing trade among the U.S., Mexico and Canada. The U.S. alone traded $1.6 trillion in goods and services with its NAFTA partners in 2009, the latest year for which data are available, and the U.S. sold 32.2% of its exports to Canada and Mexico in 2010. Trade of goods and services between the U.S., Canada and Mexico has increased from $337 billion in 1993, before NAFTA went into effect, to $1.182 trillion in 2011.
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Mexican Workers Have Benefited Less Than ExpectedWhile NAFTA encouraged significant U.S. investment in Mexico, much of that investment has been in the form of factories near the border that are called maquiladoras, where Mexican workers provide cheap labor to produce U.S. goods. This arrangement has fallen short in its goal of increasing the size of Mexico's middle class because Asian labor has proven to be cheaper, and maquiladora towns have a poor quality of life for workers.
NAFTA Lifted Tariffs but not RegulationsNAFTA may have eliminated tariffs between the U.S., Canada and Mexico, but it didn't do away with the numerous customs regulation that can stifle trade. Rule of origin regulations decide whether a good qualifies for trade under NAFTA guidelines, and exporters must complete certificate of origin paperwork. More rules determine what records businesses must keep for trades under NAFTA and for how many years. Businesses that believe their goods have wrongly been deemed unqualified can go through an appeals process. Each of the three countries has a different procedure for NAFTA claims, and businesses that violate the laws or customs procedures of any country are subject to administrative, civil or criminal penalties. In other words, even without tariffs, there are still plenty of government-imposed barriers to trade.
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