May 31, 2020  
 
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NAFTA and GATT Import Business Trade Agreements

You've heard about the NAFTA and GATT agreements. But what you might not realize is that these agreements have important ramifications for American small businesses.

As a small business owner, you're concerned about your ability to compete on the global stage.

The world is shrinking and the companies that are rising to the top of the heap are the ones who have mastered the art of selling their products both at home and overseas.

Believe it or not, the federal government is also concerned about your ability to compete internationally. The United States has a vested interest in promoting free trade and making it easier for small companies to export their products to foreign markets. To encourage free trade, the U.S. engages in treaties to remove barriers to trade and create trade policies that benefit American businesses.

GATT (General Agreement on Trade and Tariffs) and NAFTA (North American Free Trade Agreement) have received a lot of attention over the past several decades. Yet many small business owners are still unaware of the benefits they receive from these agreements, as well as the potential downsides that these agreements may have for U.S. firms.

GATT

GATT is one of the most long and storied trade agreements the world has ever seen. It was formed in 1949 as the result of a failure to create the International Trade Organization. For almost fifty years, GATT regulated trade until it was replaced by the World Trade Organization (WTO) in 1995. During the intervening time period, GATT reduced tariffs and trade barriers among many industrialized nations. Today, WTO plays an important role in protecting the intellectual property rights of businesses that engage in global commerce.

NAFTA

NAFTA was designed to promote free trade among the U.S., Mexico, and Canada. When it was implemented in 1994, NAFTA immediately eliminated half of the tariffs on imports from Mexico and a third of the tariffs on exports to Mexico. Today, all tariffs with Mexico and Canada have been eliminated except for some agricultural exports to Mexico. NAFTA also addresses other non-tariff trade barriers among the three nations, making it easier for U.S. companies to trade with our neighbors to both the north and the south.

Potential Downsides

NAFTA and GATT have each received their share of criticism over the years. Many believe GATT (now WTO) is becoming irrelevant in the area of intellectual property rights and these issues have recently been addressed through other treaties and mechanisms. NAFTA has also been a source of controversy on a variety of fronts, including the use of government subsidies to promote unfair competition among NAFTA nations.

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