The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

North American Free Trade Agreement (NAFTA)

  • Gordon H. Hanson
Reference work entry


The North American Free Trade Agreement (NAFTA) eliminated trade barriers on most products between Canada, Mexico, and the United States. NAFTA included provisions to remove restrictions on cross-border investment, expand service trade, and address environmental and labour standards. Post-NAFTA increases in trade between member countries were matched by comparable decreases in their trade with the rest of the world. Freer trade has brought a shift in economic activity within Mexico and the United States towards their shared border and an increase in direct investment from the United States to Mexico. In Mexico these developments have contributed to greater wage inequality.


Canada–United States Free Trade Agreement Computable general equilibrium models Foreign direct investment International migration North American Free Trade Agreement (NAFTA) Regional and preferential trade agreements Rules of origin Tariffs Trade diversion Trade policy, political economy of World Trade Organization 

JEL Classifications

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Gordon H. Hanson
    • 1
  1. 1.