Much of the trade between the United States and its NAFTA partners is related to production sharing, as each country`s producers work together to create goods. The expansion of trade has led to the creation of vertical supply relationships, particularly along the U.S.-Mexico border. The flow of inputs produced in the United States and exported to Mexico and the return of finished products have significantly increased the importance of the U.S.-Mexico border region as a production site.57 U.S. manufacturing industries, including automotive, electronics, appliances and machinery, all require the support of Mexican manufacturers. One report estimates that 40% of the content of U.S. imports from Mexico and 25% of the content of U.S. imports from Canada are of U.S. origin. In comparison, U.S. imports from China are expected to have only 4% U.S. wages. Together, products from Mexico and Canada account for about 75% of all U.S. domestic content imported into the United States.58 The United States is by far Mexico`s largest merchandise trading partner.
U.S. exports to Mexico have grown rapidly since NAFTA, from $41.6 billion in 1993 to $231.0 billion in 2016, an increase of 455% (see Table A-1). U.S. imports from Mexico increased from $39.9 billion in 1993 to $294.2 billion in 2016, an increase of 637 percent. The trade balance with Mexico has grown from a surplus of $1.7 billion in 1993 to a deficit of $74.8 billion in 2007. Since then, the trade deficit with Mexico has narrowed to $63.2 billion in 2016.47 Labour and environmental agreements contained language to promote labour and environmental cooperation, as well as provisions to address a party`s inability to impose its own labour and environmental legislation. Perhaps most notable was the settlement of disputes in ancillary agreements, which may ultimately impose monetary assessments and sanctions to address a party`s inability to enforce its laws.35 NAFTA marked the first time that the labour and environmental provisions were associated with a free trade agreement. For many, it was an opportunity for cross-border cooperation on environmental and labour issues and to establish a new type of relationship between NAFTA partners36.
The three parties responsible for the formation and maintenance of NAICS are the Instituto Nacional de Estadistica y Geografia in Mexico, Statistics Canada and the United States Office of Management and Budget, through its Economic Policy Committee. , including the Bureau of Economic Analysis, the Bureau of Labor Statistics and the Bureau of Census. The first version of the classification system was published in 1997. A review in 2002 reflected major changes in the information sector. The last revision, in 2017, resulted in 21 new sectors through the reclassification, splitting or merging of 29 existing industries. The United States, Canada and Mexico could try to negotiate new rules of origin to deal with modern developments in automotive and automotive production or to encourage production in the North American automotive industry by enhancing rules of origin. NAFTA has phased out Mexico`s restrictive auto decree and opened Mexico`s auto sector to foreign investment from the United States.