	Background

The North American Free Trade Agreement (NAFTA), signed by President George Bush onDecember 17, 1992, has been in effect since January 1994. After almost ten years ofimplementation, there is some evidence that NAFTA has achieved many of the trade and economicbenefits that proponents claimed it would bring, although there have been adjustment costs at thesectoral level. (1) As the United States considers free trade initiatives with other Latin American countries, the effectsof NAFTA may provide policymakers some indication of how these initiatives might affect U.S.industries and the overall U.S. economy. To address concerns regarding worker dislocations, Congressincluded two adjustment assistance programs, designed to ease trade-related problems, in theimplementing legislation for NAFTA: the NAFTA Transitional Adjustment Assistance(NAFTA-TAA) Program and the U.S. Community Adjustment and Investment Program (USCAIP). The NAFTA-TAA Program was consolidated with the former Trade Adjustment Assistance (TAA) program under the Trade Act of 2002 ( P.L. 107-210 ) and is now part of a new reformed TAAProgram. The previous NAFTA-TAA program provided assistance, including employment servicesand training, to workers who have lost their jobs due to import competition or production shifts toMexico or Canada. Most of the trade-related effects of NAFTA may be attributed to changes in U.S. trade and investment patterns with Mexico. At the time of NAFTA implementation, the U.S.-Canada FreeTrade Agreement already had been in effect for five years and some industries in the United Statesand Canada were already highly integrated. The report indicates that the increase in U.S. trade with Mexico since 1994 was alsoaffected by currency fluctuations, economic growth in the United States and Mexico, and animproved general business climate in North America. How Has NAFTA Affected U.S. Industries? The automotive, chemical products, textile, and apparel industries have experienced themost significant changes in trade flows, which may also have affected employment levels in theseindustries. U.S. Exports by Country. U.S. Imports by Country. Thesenumbers could suggest that Mexico may be supplying the U.S. market with goodsthat would have otherwise been supplied by Asian countries. Since NAFTA, Mexico has become a more significant trading partner in the U.S. motor vehicle market. As mentioned previously, data on the effects of NAFTA isvery limited and the effect on specific U.S. industries is difficult to quantify. Trade-related job gains and losses since NAFTA may have accelerated trends thatwere ongoing prior to NAFTA and may not be totally attributable to the tradeagreement. Another program connected with the passage of NAFTA that provides assistance to communities with significant job losses due to changes in trade patternswith Canada or Mexico is the USCAIP, which is administered for the United Statesgovernment by the Los Angeles Office of the NADBank. (33)

	Conclusion

After almost ten years of implementation, the full effects of NAFTA on the U.S.economy are still unclear. The trade effects of NAFTA are of significance because of the possibilities of a U.S. trade agreements with Chile and also the Free Trade Area of the Americasinitiative.
The North American Free Trade Agreement (NAFTA), signed by President George Bush on December 17, 1992, has been in effect since January 1994. After eight years of implementation, thefull effects of NAFTA on the U.S. economy are still unclear. There are numerous indications thatNAFTA has achieved many of the trade and economic benefits that proponents claimed it wouldbring, although there have been adjustment costs. However, there is not enough evidence to quantifythe impacts on specific U.S. industries. Some studies show that the agreement has had an overallpositive effect on the U.S. economy, but that some industries have experienced losses. As the UnitedStates considers further free trade initiatives with Latin American countries, the effects of NAFTAmay provide policymakers some indication of how these initiatives might affect U.S. industries andthe overall U.S. economy.
Most of the trade effects related to NAFTA are due to changes in U.S. trade and investment patterns with Mexico. At the time of NAFTA implementation, the U.S.-Canada Free TradeAgreement already had been in effect for five years and some industries in the United States andCanada were already highly integrated. Since NAFTA, the automotive, textile, and apparelindustries have experienced some of the more significant changes in trade flows, which may alsohave affected U.S. employment in these industries. U.S. trade with Mexico has increasedconsiderably more than U.S. trade with other countries, and Mexico has become a more significanttrading partner with the United States since NAFTA implementation. Consequently, Mexico's shareof total U.S. trade has increased while that of other countries has decreased. Some data on U.S.imports suggest that Mexico may be supplying the U.S. market with goods that may have otherwisebeen supplied by Asian countries.
Not all changes in trade patterns since 1994, however, can be attributed to NAFTA becausetrade was also affected by other unrelated economic factors such as economic growth in the UnitedStates and Mexico, and currency fluctuations. Also, trade-related job gains and losses since NAFTAmay have accelerated trends that were ongoing prior to NAFTA and may not be totally attributableto the trade agreement.
To address concerns about worker dislocations related to NAFTA, Congress included two employment adjustment assistance programs in the implementing legislation: the NAFTATransitional Adjustment Assistance (NAFTA-TAA) Program and the U.S. Community Adjustmentand Investment Program (USCAIP). The NAFTA-TAA program is now part of a new consolidatedTrade Adjustment Assistance (TAA) program passed under the Trade Act of 2002 ( P.L. 107-210 ). The NAFTA-TAA program provides assistance, such as employment services and training, toworkers who have lost their jobs because of increased import competition or by production shifts. The USCAIP provides assistance to communities with significant job losses due to changes in tradepatterns with Canada or Mexico. While the programs have been successful in providing assistanceto communities who have had significant job losses, the overall effectiveness of the programs hasbeen limited. This report will be updated as events warrant.