What is NAFTA?
The North American Free Trade Agreement (NAFTA) entered into force in 1994, accelerating and locking in trade liberalization by opening markets, removing trade barriers, and reducing tariffs between the United States, Canada, and Mexico. NAFTA has provided U.S. services providers with significant market access, particularly in cross-border services and investment, strong investment protections, and the ability to compete successfully for major government procurement opportunities.
The NAFTA investment provisions have also produced significant U.S. inbound investment from Canada and Mexico, which support U.S. jobs. As of 2014, Mexico had invested nearly $18 billion in the U.S. market, particularly in manufacturing, distribution services, and banking. As of 2015, the United States accounted almost half of Canadian global foreign direct investment (FDI) at $448 billion, primarily in manufacturing and financial services.
However, the world and the global economy have changed significantly since NAFTA’s introduction. NAFTA lacks any provisions on the digital economy and does not reflect the rise of digital services in defining modern trade.
On May 18, 2017, the United States Trade Representative (USTR) notified Congress of its intent to modernize the North American Free Trade Agreement. This initiated the process of negotiating the agreement under Trade Promotion Authority, by which USTR must consult and communicate with Congress while pursuing specific objectives for the agreement, set out in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015.