It is interesting to note that while USA was pressing for bringing into existence the World Trade Organisation (WTO) under the plea that the world needed a rule-based free international trade regime, and that hitherto left out trade and non-trade issues should also be brought under its purview, it was simultaneously negotiating a free trade area for the North American countries.
While the negotiations for the WTO were concluded in December 1993 and the WTO agreement was signed on April 15, 1994, the North American Free Trade Agreement came into force on January 1, 1994.
It should be noted, however, that NAFTA had legal validity as it was allowed under Article XXIV of GATT which was also incorporated into WTO.
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The North American Free Trade Agreement was signed by the Government of the United States of America, the Government of the United Mexican States and the Government of Canada.
Other countries, individually or as groups, are permitted to join it by subscribing to its aims, objectives, principles and other terms and conditions.
Similarly, a country (or a group of countries) may leave it but, in that eventuality, the Agreement continues to be in force for the remaining members.
Objectives and Coverage:
The basic objective of NAFTA was to bring into existence a free trade area between the member countries. It is noteworthy that a major portion of trade between US and Canada was already sufficiently free and the new agreement was expected to only complete the process of having fully-free trade between the two neighbours.
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Trade with Mexico needed more liberalisation and was expected to add to the total inter-member trade. USA happens to be one of the biggest economies of the world and the other members of NAFTA were expected to gain substantially by the new arrangement.
However, USA also hoped to demonstrate that a trade regime accompanied by all-pervasive and comprehensive provisions relating to trade not only works but is quite efficient as well.
The objectives of NAFTA are contained in Article 102 which states as follows:
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The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored- nation treatment and transparency, are to:
(a) Eliminate barriers to trade in, and facilitate the cross border movement of goods and services between the territories of the Parties;
(b) Promote conditions of fair competition in the free trade area;
(c) Increase substantially investment opportunities in their territories;
(d) Provide adequate and effective protection and enforcement of intellectual property rights in each Party’s territory;
(e) Create effective procedures for the implementation and application of this Agreement, and for its joint administration and the resolution of disputes; and
(f) Establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.”
It is noteworthy that the Agreement has an extensive and exhaustive coverage containing minute details of quantities and values at various places.
It covers all those issues which could or could not be incorporated in the newly concluded WTO. One reason because of which such an exhaustive agreement could be concluded was the dominating economic and political position of USA in the region.
The Agreement covers, for example, not only trade in goods, but also that in services including financial services. It also covers trade-related issues like investment, intellectual property rights, customs procedures, rules of origin, non-tariff barriers, entry of business persons, government procurement, labour cooperation, standard related measures, sanitary and physiosanitary measures, dispute settlement, and so on.