The North American Free Trade Agreement (NAFTA)
Congressional Research Service 7
and 60% for other vehicles and automotive parts. Some tariffs were eliminated
immediately, while others were phased out in periods of 5 to 10 years. Prior to
NAFTA, the United States assessed the following tariffs on imports from
Mexico: 2.5% on automobiles, 25% on light-duty trucks, and a trade-weighted
average of 3.1% for automotive parts. Mexican tariffs on U.S. and Canadian
automotive products were as follows: 20% on automobiles and light trucks, and
10%-20% on auto parts.
Agriculture. NAFTA set out separate bilateral undertakings on cross-border
trade in agriculture, one between Canada and Mexico, and the other between
Mexico and the United States. As a general matter, U.S.-Canada FTA provisions
continued to apply on trade with Canada.
Regarding U.S.-Mexico agriculture
trade, NAFTA eliminated most non-tariff barriers in agricultural trade, either
through their conversion to tariff-rate quotas (TRQs)
or ordinary tariffs. Tariffs
were phased out over a period of 15 years with sensitive products such as sugar
and corn receiving the longest phase-out periods. Approximately one-half of
U.S.-Mexico agricultural trade became duty-free when the agreement went into
effect. Prior to NAFTA, most tariffs, on average, in agricultural trade between the
United States and Mexico were fairly low though some U.S. exports to Mexico
faced tariffs as high as 12%. However, approximately one-fourth of U.S.
agricultural exports to Mexico (by value) were subjected to restrictive import
licensing requirements.
Services Trade Liberalization
NAFTA services provisions established a set of basic rules and obligations in services trade
among partner countries. The agreement expanded on provisions in the U.S.-Canada FTA and in
the then-negotiation in the Uruguay Round of multilateral trade negotiations to create
internationally agreed disciplines on government regulation of trade in services.
The agreement
granted services providers certain rights concerning nondiscriminatory treatment, cross-border
sales and entry, investment, and access to information. However, there were certain exclusions
and reservations by each country. These included maritime shipping (United States), film and
publishing (Canada), and oil and gas drilling (Mexico).
Although NAFTA liberalized certain
service sectors in Mexico, particularly financial services, which profoundly altered its banking
sector, other sectors were barely affected.
In telecommunications services, NAFTA partners
agreed to exclude provision of, but not the use of, basic telecommunications services. NAFTA
granted a “bill of rights” for the providers and users of telecommunications services, including
Ibid., p. 30.
Governments of Canada, the United Mexican States, and the United States of America, Description of the Proposed
North American Free Trade Agreement, August 12, 1992, p. 12.
Tariff-rate quotas (TRQs) allowed NAFTA partners to export specified quantities of a product to other NAFTA
countries at a relatively low tariff, but subjected all imports of the product above a pre-determined threshold to a higher
tariff.
Business Roundtable, NAFTA: A Decade of Growth, p. 35.
The Governments of Canada, the United Mexican States, and the United States of America, Description of the
Proposed North American Free Trade Agreement, August 12, 1992, pp. 23-24.
United States General Accounting Office (GAO), “North American Free Trade Agreement: Assessment of Major
Issues, Volume 2,” Report to the Congress, September 1993, pp. 35-36.
Hufbauer and Schott, NAFTA Revisited, pp. 25-29.