North American Free Trade Agreement

Trade agreement between the USA, Canada, and Mexico, intended to promote trade and investment between the signatories, agreed in August 1992, and effective from January 1994. The first trade pact of its kind to link two highly-industrialized countries to a developing one, it created a free market of 375 million people, with a total GDP of $6.8 trillion (equivalent to 30% of the world's GDP). Tariffs were to be progressively eliminated over a 10-15 year period (tariffs on trade in originating goods from Mexico and Canada are to be eliminated by 2008) and investment into low-wage Mexico by Canada and the USA progressively increased. Another aim of the agreement was to make provisions on transacting business in the free trade area. The NAFTA Centre is located in Dallas, Texas.

Although the agreement was initially viewed with caution by the Canadian government and opposed by US labour unions, it was welcomed by the European Union, provided it operated within agreed WTO rules.

The origins of NAFTA lay in a bilateral Free Trade Agreement (FTA) between the USA and Canada, effective from 1989. In May 1997, at a meeting of 34 of the hemisphere's political leaders (only Cuba was absent) in Belo Horizonte, Brazil, it was agreed to negotiate a Free Trade Area of the Americas (FTAA) by 2005.