The NAFTA rules help those who are a part of the treaty function with specific guidelines.

NAFTA is comprised of 22 chapters, most of which contain regulations by which each member country is expected to abide. Although there are some exceptions (such as with the temporary entry of business persons) while other guidelines are outright ignored (given that all three countries continue to harbor a wage disparity between men and women), the following rules generally guide all trade relations between the United States, Canada, and Mexico.

Access of Goods

While the majority of products exchanged between Canada and the United States were already free of tariffs, all trade duties between the two countries were to be completely eliminated by 1998. Alternately, all duties were to be dispensed with for industrial trade between the United States and Mexico within 10 years, and for agricultural trade within 15 years. NAFTA also discarded other trade barriers, including:

• Content, production, and export quality requirements
• Local parts and labor quota requirements
• Export/import quotas
• Restrictions to the domestic production of exports and the foreign production of imports

Determinants for North American Products

Essentially, legislators wanted to ensure that NAFTA-designated preferential tariffs were not applied to products with too much foreign influence. For example, a country outside of North America could not facilitate trade between two North American countries while remaining under NAFTA sanctions. Because of the growing complexity of a progressively globalized economy, several provisions were applied in order to accommodate product cultivation and manufacture that includes some foreign influence or participation. An example is the NAFTA Shift Rule, which requires that “inputs” from foreign countries must be classified as such, subsequently subjecting these inputs to tariffs outside of NAFTA provisions, although these tariffs may not be applied to the final product. Another example is the Value-Content Rule, which requires that a certain percentage of the value of a product must be North American in order to be accepted under NAFTA sanctions.

Customs

In order to facilitate open trade between the three countries more effectively, Canada, the United States, and Mexico agreed to uniform customs policies under NAFTA. Not only does this abate the complexity of procedures typically associated with customs, it also renders the exporting process more efficient. In essence, verification, record keeping, and rules of origin are now all handed on the same plane under NAFTA so that the transfer of goods between each country can be expedited. Yes, not only will NAFTA be more successful (relative to its purpose), but trips to Cancun, Tijuana, and Montreal will be as well.

Agriculture

As for Agriculture, agreements were a little less standardized. Due to the fact that Mexico has a much richer agricultural foundation than the United States and Canada (and the fact that Mexico is more proximal to the United States than Canada), agricultural trade agreements were reached separate of NAFTA. Alternately, there are three primary agreements that were applied because they were able to be standardized, and these include the following:

• Agricultural safeguards that allow a country to revert to pre-NAFTA tariffs when necessary for the first ten years after NAFTA took effect
• Domestic support policies that are in conformance with the General Agreement for Tariffs and Trade
• The avoidance of export subsidies between North American countries
• A committee on agricultural trade to manage the implementation of NAFTA agricultural agreements

General Safeguard

Chapter 8 of NAFTA, titled “Emergency Action,” includes a generalized safeguard for any country that feels that they have been economically injured by any provision included in the history of NAFTA, to include tariff adjustments. Known as the “safeguard” or “escape” clause, it allows any country to opt out of NAFTA’s agreements on a case-by-case basis, or for a period of 3-4 years.

Standards of Quality and Assurance

This policy is two-fold. On one hand, it assures that no standards for quality, performance, labeling, or the like that hinder trade can be applied. On the other, it allows all stakeholders to participate in the construction of quality standards, to include corporations and other interested parties. As far as trade agreements go, this is the first of its kind.

Government Procurement

One of the main provisions of NAFTA is to give the United States and Canada (who already had such provisions between one another under the Canada-U.S. Free Trade Agreement) access to Mexico’s government procurement market (and vice versa), which includes parastatals (government controlled enterprises), the manufacture and cultivation of goods, and contracts for services and construction. Apparently, the benefit rests primarily on the United States and Canada, which will gain access to progressively more government procurements as Mexico continues to bolster its economy.

Investment

Naturally, for a merge of three capitalistic economies to be successful, investment must be taken into consideration. Hence, in order to viably synthesize the United States, Mexican, and Canadian economies, investment policies required synthesis as well. The results were parameters for investment in foreign NAFTA countries, the reduction of investment restrictions between North American countries, and guidelines for settling disputes between investors and foreign NAFTA countries. They also ensure that foreign investors are treated the same as domestic investors, thereby eliminating lines of distinction between North American countries in terms of investment.

Trans-Continental Trade

In the “Cross-Border Trade in Services” chapter of NAFTA, specifications for trade and travel between NAFTA countries are extrapolated. This covers all services with the exception of air transportation, marine transportation, and basic telecommunications (as opposed to enhanced telecommunications). These specifications take into account the manufacturing process, the sales process, the transportation of goods and services between countries, the presence of a foreign service provider (from another NAFTA country), and the application of a bond or other type of financial collateral as a condition for the procurement of a product or service.

Temporary Entry of Business Persons

With this provision, business people are gained entry to another NAFTA country if he or she fulfills five specifications, including:

International engagements that are a part of the manufacturing or sales process

• Business persons whose parent companies are conducting substantial trade with the country they are attempting to enter
• Investors who intend to contribute a substantial amount to a market of the country they are attempting to enter
• Company transferees
• Practicing professionals of specified fields, to include lawyers, economists, architects, and accountants

Once matters went sour between Cuba and the United States, though, the enactment of the Helms-Burton Law granted an exception to this rule – Canadian business people who did business with Cuba were granted substantially restricted access to the United States.

Intellectual Property

Under NAFTA, intellectual property rights were officially extended to the entirety of North America to ensure that innovations were not unjustly exploited. This was applied in a variety of ways:

• The requirement that each member country enforce patent protection rights
• Ensures the protection of developing intellectual property, to include computer programs and sound recordings
• Bars the availability of patent protection for most technologies so that each country can enjoy a full spectrum of innovations
• Expands the coverage of product and process patents

Dispute Settlement

Under NAFTA, in order to standardize dispute settlement, a trilateral free trade commission known as the Secretariat was developed. This panel is responsible for hearing disputes, discussing problems between the three countries involving trade, and make rulings based on conformance to NAFTA tenets. Upon conducting a hearing, the panel must submit a preliminary report to the disputing parties within 90 days, and a final report within another 30 days. If the panel finds an inconsistency, then it can issue recommendations that can either be accepted or rejected. Upon rejection, the affected company can then reciprocate with the withdrawal of equivalent trade provisions.

Special concessions for dispute resolution includes (a) environmental and health issues, for which a scientific review board of experts in the field can be assembled to assess evidence; (b) investment, where the panel can approach the accused country directly for violations of NAFTA investment standards; (c) anti-dumping and countervailing duty, whereby decisions by the panel (most often bilateral) are based on domestic law; and (d) commercial disputes, through which alternative methods of dispute settlement are encouraged (between private parties), including arbitration, requiring each country under NAFTA to have a legal construct that enforces arbitration rulings.

Environmental Standards

Credited to President Bill Clinton, the advocation of strict environmental standards have been included in the agglomeration of NAFTA rules and regulations. While each North American country may establish and alter its own environmental standards as it sees fit (which logically follows, given the degree of variety in frontier between the three counties), the reduction of environmental standards in the interest of investment is strongly discouraged, and fresh water standards are covered both in NAFTA and the General Agreement on Tariffs and Trade. Furthermore, any individual entity, whether it is a business, state, nation, or single civilian, can accuse a neighboring nation of violating its own environmental policies.

Labor Cooperation

Labor Cooperation is the most controversial aspect of NAFTA, especially within the United States. It requires that each North American country provides guarantees that all administrative, judicial (and quasi-judicial), and labor engagements are just and transparent. Specifically, each country must proliferate, to the maximum extent, the following canons:

• Freedom of association and the right to assemble
• The right to collective bargaining
• The right to strike
• The right to refuse labor
• Child and young person labor sanctions
• Minimum wage requirements
• The expulsion of employment discrimination
• Gender equality
• Occupational hazard prevention
• Compensation for occupational injury and/or illness
• Protection for migrant workers

Because Canada does not spread its federal jurisdiction over labor across all of its provinces, each of these provinces have joined the agreement individually. This duality (separation between state/province and federal levels) has continued to present problems as NAFTA standards evolve.