Thank you for visiting our “Top 5 Delivered by DHL” series. It’s a fast and informative way to help you learn more about global topics that affect your business. Below, we’re delivering insights about the North American Free Trade Agreement (NAFTA). Look for more videos about Holiday Shipping, Going Global, Cuba, Brazil, Avoiding Import Delays, International Business Travel , and Global E-Commerce on our YouTube playlist.
For more than 30 years, Free Trade Agreements (FTAs) have facilitated international trade, fueled economic growth, raised living standards and allowed American families to gain access to affordable goods and services. With these benefits in mind, U.S.-based business owners looking to sell their goods abroad should understand which of the existing 14 FTAs is most advantageous to their business according to the destination country.
One of the most well-known and successful trade agreements is NAFTA, impacting trade with our Canadian and Mexican neighbors. NAFTA has generated $1.2 trillion in trade and supported 14 million U.S. jobs since it was created in 1994. With North America representing 25 percent of the world’s GDP, there is continued optimism about the future of trade between the U.S., Canada and Mexico, and the prospect for expanded investment.
With the current administration, NAFTA is being examined and may change, which would have future implications on trade with Canada and Mexico. At this time, however, the current NAFTA is in place. Here are the top five things your business should know about the trade agreement:
1. The background
NAFTA is an agreement between Canada, Mexico and the United States. Since it took effect in 1994, the free trade agreement has significantly reduced the cost of trading between the North American countries by removing tariffs (completely as of 2008) and other trade restrictions for all traded goods amongst the three countries. Some of the industries that benefited the most include agriculture, textiles and automobiles. It spurred the integration of supply chains across North America.
2. It increases opportunities with our neighbors
There are generally lower logistics costs involved in trade with Canada and Mexico due to NAFTA. Given the close proximity, and the productive relationships that exist between our governments, border movements are simplified relative to other nations. Compared with shipping to and from Asia, transporting goods and materials to and from our closest neighbors is comparatively inexpensive.
NAFTA has generated $1.2 trillion in trade since it was created. In fact, Canada and Mexico, are buying more Made-in-America goods and services than any other countries in the world.
3. It provides IP rights protection
NAFTA provides IP rights coverage to a wide range of industries, with the exception of aviation transport, maritime, and basic telecommunications. The agreement also provides intellectual property rights protection in a variety of areas including patent, trademark, and copyrighted material.
4. It benefits small businesses
NAFTA leveled the playing field by letting small businesses export to Mexico at similar costs as large companies and by removing the requirement that a business establish a physical presence in Mexico in order to do business there.
5. The top export industries
Principal U.S. exports to Mexico and Canada include electrical machinery, machinery, vehicles, mineral fuel/oil, and plastics. In fact, U.S. manufacturing exports to NAFTA countries have increased 258 percent in the last 20 years. In addition, NAFTA greatly expanded U.S. agricultural exports to Mexico and some of the major exports are corn and wheat.
Both Canada and Mexico have a very skilled labor force and the high-quality engineering education needed to support production and manufacturing jobs, so if your business is just getting into the global game, these two countries are a good place to start.
Is your company taking advantage of NAFTA and trading with Canada and Mexico? Let us know on Twitter @DHLUS.