The North American Free Trade Agreement NAFTA

1
The North American Free Trade Agreement (NAFTA)

• Service Provisions Technical Barriers to Trade

2

• the approach, language, concepts and philosophy
  of NAFTA agreement all come from GATT
• principle of National Treatment first discussed
  in GATT once goods, services, or investment
  are imported into a member country, they will be
  treated in the same way as domestic goods,
  services and investment

3

• the results of National Treatment is internal
  taxes and health and safety standards must be
  uniform for foreign and domestic concerns
• US and Canada had more in common in late 1980s
  than with many other GATT members
• shared complementary commercial regulation and
  shared market for trade

4
Exceptions, Reservations

• governments preserve sovereignty by
• Exceptions provided in GATT. These are
  trade-restrictive measures
• protection of public morals
• protection on intellectual property
• conservation of exhaustible natural resources
• Reservations lets member countries list areas
  they wish to exempt from NAFTA. Bound and
  unbound reservations. (see p.89 of reading)

5
Trade in Goods under NAFTA

• trade concerns divided into goods, services and
  investments
• NAFTA does not create a common market for trade
  in goods, but it does create a free trade zone
  for goods

6
Reduction in Tariffs

• NAFTA is a gradual phasing out of tariffs
• exceptions made for certain sensitive items
• no new tariffs imposed on goods
• most quotas and import licenses were to be
  eliminated
• exporters must consult the Tariff Schedules to
  look up thousands of tariffs aircraft parts,
  fish, chemicals, etc.

7
Rules of Origin

• Rules of Origin significant for exporter,
  importer because they determine which goods
  qualifty for favourable treatment under NAFTA
• HONDA 1992 cars didnt receive tariff-free
  treatment because engine blocks manufactured in
  Ohio and put into cars built in Ontario ruled by
  US customs as not meeting NA regulations
• dispute resolved by NAFTA

8
Goals of NAFTA

• 1. make rules of origin more transparent
• 2. protect gains made under the Canada-US Free
  Trade Agreement
• 3. establish ways to make rules work more
  uniformly, easily
• result is a long, complex agreement

9
Originating goods

• originating goods within the NAFTA area are
  eligible for preferential tariff treatment
• wholly obtained and bought in NA
• have non-NA content but have been substantially
  transformed
• non-originating materials used in production must
  be reclassified (look at sufficient NA value
  added)
• finished gods and parts are classified under the
  same tariff heading (look at regional value
  content)

10
Harmonized Commodity Description and Coding
System (HS)

• the basis for tariff classification developed by
  Customs Description and Coding Council and
  adopted by most trading countries
• an annex to NAFTA prescribes the degree of change
  in classification necessary for specific goods to
  qualify for area treatment
• certificate of origin must be issued with the
  utmost care and exporters can be liable if
  incorrect
• importers need a valid certificate of origin to
  claim area or preferential treatment