North America Trade Pact: a Good Idea?

December 8, 1989

Report Outline
Special Focus

Introduction

The U.S.-Canada free-trade pact, which took effect early this year, may serve as a model for future bilateral pacts with Mexico, the Caribbean and Central America. Ultimately; such pacts could lead to the formation of a North American trading bloc. Some say expanding the U.S.-Canada pact to include Latin American countries is not politically feasible and that it wouldn't benefit the U.S. economy anyway. But economic developments in Europe and the Far East could force the United States to move in this direction.

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Overview

When President Reagan announced the beginning of negotiations for a free-trade agreement with Canada in 1985, he envisioned it as a first step in the formation of a North American trading bloc that would stretch from “the Yukon to the Yucatan.” That first step was completed on Jan. 2, 1988, with the signing of the U.S.-Canada Free Trade Agreement. The pact went into effect a year later, after it was approved by both countries' governments.

The free-trade agreement puts the countries that comprise the largest single trading relationship in the world—with more than $147 billion in two-way trade in 1988—into an unprecedented partnership. Under the pact, all tariffs on U.S.-Canadian trade will be removed by 1998. The pact also liberalizes trade in services and agriculture, areas not yet covered by multilateral trade pacts, and it provides a mechanism for resolving trade disputes between the two countries.

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Jan. 25, 1940  Tariff Reciprocity and Trade Agreements
Jun. 11, 1935  Foreign Trade Policy of the United States
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BROWSE RELATED TOPICS:
North American Free Trade Agreement (NAFTA)