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34486 - Order Code RS21737 CRS Report for Congress Received...

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Congressional Research Service ˜ The Library of Congress CRS Report for Congress Received through the CRS Web Order Code RS21737 February 13, 2004 NAFTA at Ten: Lessons from Recent Studies J. F. Hornbeck Specialist in International Trade and Finance Foreign Affairs, Defense, and Trade Division Summary On January 1, 2004, the North American Free Trade Agreement (NAFTA) completed its tenth year and most of its provisions are now implemented. NAFTA is a free trade agreement (FTA) that effectively added Mexico to the U.S.-Canada FTA completed in 1989. Its anniversary has sparked numerous evaluations, which are particularly relevant as the United States pursues free trade agreements with multiple Latin American countries. Most studies found that NAFTA’s effects on the U.S. and Mexican economies to be modest at most. This report provides an analytical summary of the economic lessons reached in support of Congress’s role in the trade policy process. It will be updated as needed. Introduction Free trade agreements are supposed to enhance the welfare of participating countries, so evaluating their effects is a valuable exercise. NAFTA is particularly relevant to the bilateral trade agreements being considered by the United States today because it was the first trade agreement in a non-multilateral setting between a developing and two developed countries. As such, it is important to note that this report focuses on U.S.- Mexico issues, not because Canada is unimportant, but because the U.S.-Canadian free trade agreement predates NAFTA, is less controversial in the eyes of most trade critics, and is less relevant (because it entails trade between two developed economies) to the pending trade agreements with Latin America. Further, because trade between Canada and Mexico remains very small, the trilateral trade agenda is still only emerging, although there is growing interest in analyzing immigration, security, and other issues within this trilateral framework. This report evaluates four studies produced by the Congressional Budget Office (CBO), the World Bank, the Carnegie Endowment for International Peace, and the United States International Trade Commission (USITC). These assessments of NAFTA, by and large, are analytical in nature, use established methodologies, caveat their own work to reflect limitations of the research, and draw on academic rather than special interest research. The details of their methodologies are not reproduced here, but it is important to note that they faced similar research challenges. These include: 1) isolating the effects
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CRS-2 1 Lederman, Daneil, William F. Maloney, and Luis Serven. Lessons From NAFTA for Latin America and the Caribbean Countries: A Summary of Research Findings . The World Bank, Washington, D.C. December 2003, Audley, John J., Demetrios G. Papademetriou, Sandra Polaski, and Scott Vaughan. NAFTA’s Promise and Reality: Lessons from Mexico for the Hemisphere . Carnegie Endowment for International Peace, Washington, D.C. 2004, and United States International Trade Commission.
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