BACKGROUND: On September 25, 1990, President Bush officially notified Congress of his intent to begin negotiations on a free trade agreement with Mexico. Canada--which negotiated a free trade agreement (FTA) with the U.S. in 1988--joined the NAFTA talks on February 5, 1991.
President Bush asked Congress on March 1, 1991 for a two-year extension of fast track negotiating authority to implement two important objectives--the GATT multilateral trade talks and the proposed NAFTA negotiations. Under the fast track process, the Administration is required to present a completed agreement to Congress, at which time lawmakers vote to accept or reject the agreement without amendments.
Opponents of the trade pacts immediately introduced legislation to deny the President a fast track extension--H. Res. 101 (Dorgan--D-ND-AL) and S. Res. 78 (Hollings--D-SC). They claimed that NAFTA would end in job losses for American workers. But President Bush cited three major economic studies, all of which concluded that NAFTA would benefit the U.S. in terms of exports, output and jobs.
In an effort to allay congressional concerns, President Bush submitted an action plan to Congress on May 1, 1991 that outlined specific steps the Administration would take to address labor, economic and environmental issues surrounding the negotiations. The action plan won the support of key congressional leaders, including Rep. Dan Rostenkowski (D-IL-8) and Sen. Lloyd Bentsen (D-TX)--chairmen of the House and Senate committees with jurisdiction over trade matters.
Industry's efforts in communicating the importance of the GATT and NAFTA negotiations were successful, as both the House and Senate rejected organized labor's attempt to deny the President fast track authority. The House voted 231-192 against H.Res. 101 on May 23, and the Senate voted down S.Res. 78 on May 24 by a 59-36 tally.
Following congressional approval of fast track, negotiations continued for more than a year. Negotiators from the three nations announced a final agreement on August 12, 1992.
In a separate initiative, the U.S. EPA and its Mexican counterpart released an environmental plan in 1992 to address air, soil, water, and hazardous waste problems along the U.S.-Mexican border. In conjunction with the border plan, President Bush proposed a 70 percent increase in the budget for border environmental projects to $241 million for FY 1993.
Ironically, Congress rejected a $50 million EPA request to clean up U.S. "colonias"--unincorporated U.S. communities along the Mexican border. House members also cut in half the President's $65 million request for a Tijuana-San Diego sewage treatment plant. Similarly, the Senate failed to authorize $120 million to help clean up the U.S.-Mexican border.
Legislative Action: Hearings on NAFTA were conducted throughout 1992 in dozens of congressional committees. On September 18, 1992, President Bush formally notified Congress of his intent to sign NAFTA, fulfilling the 90-day notification period required under current law.
Three weeks later, Democratic presidential candidate Bill Clinton gave his support to the agreement, adding that side agreements with Mexico addressing the environment and worker rights may be necessary. Clinton listed several steps he would take if elected--none of which required renegotiating the NAFTA text.
As expected, some Democratic lawmakers resumed their attacks against NAFTA during the 1992 election campaigns. House Majority Leader Gephardt (D-MO-3) called for significant changes to the agreement. Two Michigan Democrats--Sen. Don Riegle and Rep. Sander Levin--resurrected efforts to amend the fast track process. Riegle's plan would have allowed floor amendments to the agreement in five areas: labor standards, environmental standards, unemployment and retraining benefits, rules of origin, and dispute resolution. Similarly, Levin's proposal would have permitted the House to consider NAFTA under a modified closed rule with up to four amendments. The resolutions gained a substantial number of cosponsors but never received floor consideration.
President Bush signed the NAFTA agreement on December 17, 1992 at a meeting of the Organization of American States. The accord was signed prior to the expiration of the President's negotiating authority, forcing Congress to either change its procedures or to consider NAFTA under fast track rules--which limits the amount of debate and requires lawmakers to vote up-or-down on the measure without amendments.
103rd Congress: President Clinton reiterated his desire to negotiate side agreements on NAFTA in the areas of safeguards, labor and environmental issues in January. Negotiations with Mexico and Canada began in the spring.
Anti-NAFTA forces--led by organized labor, some environmental activists, former presidential hopeful H. Ross Perot and consumer groups led by Ralph Nader--launched verbal attacks against the trade pact on Capitol Hill early and often in 1993, despite President Clinton's efforts to allay their concerns. In related action, several House members with close ties to organized labor announced the formation of an "Anti-NAFTA Caucus" early in 1993. In July, more than 100 House and 7 Senate Democrats joined House Majority Leader David Bonior (D-MI-10) in urging President Clinton to postpone action on NAFTA until after Congress had completed work on health-care reform--a strategy that most NAFTA supporters believed would kill the trade pact. The White House responded that both NAFTA and health-care reform would be on the agenda in the fall.
Trade officials from the three NAFTA nations announced August 13 they had reached a deal on side agreements. Lawmakers returning home to their districts in August were barraged by anti-NAFTA sentiment. Many supporters of NAFTA returned to Washington publicly undecided on the pact. Convinced that NAFTA's passage was contingent upon a strong push by the White House, dozens of House Republicans--led by Minority Leader Newt Gingrich (R-GA-6)--said they would withhold their support until the President demonstrated his commitment to the issue.
That commitment came September 14, 1993, when President Clinton--accompanied by former Presidents Ford, Carter and Bush--issued a strong statement of support for NAFTA.
NAFTA in the Courts: Another key development in the NAFTA battle occurred in the courts. Three opponents of NAFTA--Ralph Nader's Public Citizen organization, the Sierra Club and Friends of the Earth--filed suit in 1992 against the Bush Administration for not completing an environmental impact statement (EIS) on NAFTA. A federal judge sided with NAFTA opponents in a controversial decision announced June 30, 1993. The ruling would have required the Administration to complete an EIS on NAFTA before sending it to Congress--a process that would have taken months or even years.
Because of the burdensome procedural requirements associated with an EIS, the ruling posed a serious threat to all future U.S. trade agreements. If allowed to stand, America's trading partners would have had little or no confidence in the ability of the U.S. to fulfill its part of a trade bargain in a finite period of time. The Clinton Administration asked a U.S. appeals court to reverse the decision, as did the NAM and 11 other trade associations in an amicus brief filed July 20. The appeals court concurred with NAM arguments on September 24 and reversed the federal judge's decision.
1993 Legislative Action: Following several weeks of congressional hearings on NAFTA, the President sent the NAFTA implementing bill to Congress on November 4. Anti-NAFTA forces claimed they had enough votes to defeat the bill in the House, but as the House vote scheduled for November 17 approached, intense lobbying efforts by the White House and by the NAM and its members proved successful.
In the end, the House approved NAFTA by a 234-200 vote. The Senate followed suit by approving NAFTA 61-38. President Clinton signed the legislation into law (P.L. 103-182) on December 8, and the agreement took effect January 1, 1994.
Developments Since Passage of NAFTA: Passage of NAFTA has tremendously benefitted the U.S. economy. The pact eliminated Mexican tariffs on some 4,500 items. The Commerce Department reported in 1994 that within six months of NAFTA's implementation: 1) U.S. exports to Mexico reached record levels ($24.5 billion); 2) exports to Canada and Mexico accounted for roughly 100,000 new American jobs; and 3) key capital goods exports to Mexico were more than 20 percent higher than the same period in 1993.
Major Provisions in NAFTA: NAFTA is consistent with GATT international trading rules and does not erect new barriers to countries outside North America. Key provisions include:
1.TARIFFS. NAFTA phases out all duties in North America within 15 years. All of Mexico's tariffs on U.S. manufactured exports will be eliminated in 10 years.
2.NON-TARIFF BARRIERS. Mexico agreed to cut back or phase out several programs that have impeded U.S. exports to Mexico, including import licensing restrictions and standards that require U.S. firms in Mexico to purchase Mexican--rather than American--parts.
3.RULES OF ORIGIN. Strict content requirements in NAFTA are designed to ensure that North American firms--rather than Asian or European companies--are to be the principal beneficiaries. For example, NAFTA increases the domestic content requirement for automobiles from 50 percent under the U.S.-Canada FTA to 62.5 percent over an eight-year period.
4.INVESTMENT. U.S. companies operating in Mexico will be treated equally with Mexican companies. Mexico also agreed to drop requirements that had forced foreign companies to export more than they imported as a condition of being allowed to invest.
5.INTELLECTUAL PROPERTY. NAFTA provides a higher level of protection for intellectual property rights--patents, trademarks and copyrights--than any other bilateral or multilateral agreement.
6.GOVERNMENT PROCUREMENT. New provisions, especially in the areas of oil and gas equipment and power generating equipment, provide new opportunities for U.S. companies.
7.SAFEGUARDS. The agreement allows any country to apply restraints if imports in one sector or another come in so fast that they threaten the existence of the domestic companies in that business.
This report was prepared by the NAM Member Communications Department. Copyright © 1998 by the National Association of Manufacturers.