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Is NAFTA Still in Effect in 2022?

What exactly is NAFTA, and how does it compare to the USMCA? Are they still in effect? Come take a look at our article to learn about the two agreements.

Is NAFTA Still in Effect in 2022?
USA and Canada trade relations

The North American Free Trade Agreement (NAFTA), which was established in 1994 to facilitate trade between the US, Mexico, and Canada, was effectively replaced by the United States-Mexico-Canada Agreement (USMCA). This was signed in 2018 and came into full effect in 2020.

What You Need to Know About NAFTA

In the early nineties, NAFTA was implemented to encourage economic activity between the three major economic powers of North America: Canada, the US, and Mexico. Supporters of NAFTA believed that all nations involved would benefit from reductions in tariffs, which would promote trade between the three countries. 

The idea of a common market in North America was proposed by then-President Ronald Reagan in his 1980 presidential campaign. The market was to follow in the footsteps of the European Economic Community, which was initiated in 1957 with the Treaty of Rome. In 1984, the US congress passed the Trade and Tariff Act, which opened the door for bilateral trade agreements. 

In August 2018, former President Donald Trump announced that NAFTA would be replaced by the US-Mexico Trade Agreement, a new trade deal with Mexico that would eliminate non-tariff barriers while facilitating more agricultural trade between the two nations. In September, the agreement was amended to also include Canada, and the USMCA finally came into effect on July 1, 2020, replacing NAFTA.

Flags of countries participating in NAFTA
Flags of countries participating in NAFTA

-6%
Pure Tephrosia Pure Tephrosia
$7.50
$8.00
India
India
Table Runner Table Runner
$13.00
India
India
-5%
Quickie Q500 M Power Wheelchair Quickie Q500 M Power Wheelchair
$14,000.00
$14,800.00
United States of America
United States of America
-28%
Surface Roughness Tester Surface Roughness Tester
$500.00
$700.00
China
China
-2%
Garlic Garlic
$4.50
$4.60
India
India
-8%
Coconut Charcoal Briquettes Coconut Charcoal Briquettes
$1,275.00
$1,400.00
Indonesia
Indonesia
-43%
Moringa Dry Leaves Moringa Dry Leaves
$1.13
$2.00
India
India
-4%
CV70 Ultrasound System (Acuson) CV70 Ultrasound System (Acuson)
$13,100.00
$13,700.00
United States of America
United States of America
black pepper black pepper
$7,526.00
India
India

How Does the USMCA Compare with NAFTA?

At the time that the USMCA was first announced, a press release from the US and Canada Trade Offices stated that the new agreement would be beneficial to multiple industries in the US, Canada, and Mexico. It was claimed that “USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade, and robust economic growth in our region. It will strengthen the middle class and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home."

Will the USMCA Be More Beneficial than NAFTA?

There is much debate as to whether the new USMCA will be more beneficial than NAFTA. In its time, NAFTA was fairly controversial. While it promised advantages to all participating countries, it was also heavily criticized for causing job losses in manufacturing and increasing inflation and trade deficits in the US. However, it was also praised for assisting small and medium-sized businesses in engaging in international trade by lowering the costs of import and export. It also boosted the competitiveness of the US industry, generated new opportunities for small businesses, and implemented universal, higher health, safety, and environmental standards.

The USMCA effectively builds on NAFTA, using the older legislation as a basis while incorporating some differences. One key difference is the revision of labor laws relating to Mexico. An independent investigatory panel has been established to investigate companies accused of violating workers' rights. The revision should stop violations of workers’ rights and enhance wages. Therefore, it is believed that the USMCA will be more beneficial than NAFTA, although it is uncertain if some of the disadvantages of NAFTA have been wiped out with the USMCA. Only time will tell.

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