The North American Free Trade Agreement (NAFTA) has been in effect since January 1, 1994. NAFTA was signed by President George H. W. Bush on December 17, 1992, and approved by Congress on November 20, 1993. The NAFTA Implementation Act was signed into law by President William J. Clinton on December 8, 1993 ( P.L. 103-182 ). NAFTA continues to be of interest to Congress because of the importance of Canada and Mexico as trading partners, and because of the implications NAFTA has for U.S. trade policy under the Administration of President Donald J. Trump. During his election campaign, President Trump stated his desire to renegotiate NAFTA and that he would examine the ramifications of withdrawing from the agreement once he entered into office. He has also raised the possibility of imposing tariffs or a border tax on products from Mexico. This report provides an overview of North American market-opening provisions prior to NAFTA, provisions of the agreement, economic effects, and policy considerations. On May 18, 2017, the U.S. Trade Representative (USTR) sent the 90-day notification to Congress of its intent to begin talks with Canada and Mexico to renegotiate the NAFTA, as required by the 2015 Trade Promotion Authority (TPA) ( P.L. 114-26 ). Some trade issues that Congress may address in regard to NAFTA, and the prospective renegotiation of the agreement, include the economic effects of withdrawing from the agreement, the impact on relations with Canada and Mexico, the demands that Canada and Mexico may bring to the negotiations, and an evaluation of how to "modernize" or renegotiate NAFTA. Another issue relates to the consequences of the U.S. withdrawal from the Trans-Pacific Partnership (TPP), a proposed free trade agreement among the United States and 11 other countries, including Canada and Mexico. Some TPP participants support moving forward on a similar agreement without the participation of the United States, which may have implications for U.S. competitiveness in certain markets. It also has implications for NAFTA renegotiation as it addressed several new issues not in NAFTA. Some trade policy experts and economists give credit to NAFTA and other free trade agreements (FTAs) for expanding trade and economic linkages between countries, creating more efficient production processes, increasing the availability of lower-priced consumer goods, and improving living standards and working conditions. Others blame FTAs for disappointing employment trends, a decline in U.S. wages, and for not having done enough to improve labor standards and environmental conditions abroad. NAFTA influenced other FTAs that the United States later negotiated and also influenced multilateral negotiations. NAFTA initiated a new generation of trade agreements in the Western Hemisphere and other parts of the world, influencing negotiations in areas such as market access, rules of origin, intellectual property rights, foreign investment, dispute resolution, worker rights, and environmental protection. The United States currently has 14 FTAs with 20 countries. As with NAFTA, these trade agreements have often been supported or criticized on similar arguments related to jobs. The concept of economic integration in North America was not a new one at the time NAFTA negotiations started. In 1911, President William Howard Taft signed a reciprocal trade agreement with Canadian Prime Minister Sir Wilfred Laurier. After a bitter election, Canadians rejected free trade and ousted Prime Minister Laurier, thereby ending the agreement. In 1965, the United States and Canada signed the U.S.-Canada Automotive Products Agreement that liberalized trade in cars, trucks, tires, and automotive parts between the two countries. The Auto Pact was credited as a pioneer in creating an integrated North American automotive sector. In the case of Mexico, the government began implementing reform measures in the mid-1980s, prior to NAFTA, to liberalize its economy. By 1990, when NAFTA negotiations began, Mexico had already taken significant steps towards liberalizing its protectionist trade regime. The United States and Canada signed a bilateral free trade agreement (CFTA) on October 3, 1987. The FTA was the first economically significant bilateral FTA signed by the United States. Implementing legislation was approved by both houses of Congress under "fast-track authority"—now known as trade promotion authority (TPA)—and signed by President Ronald Reagan on September 28, 1988. While the FTA generated significant policy debate in the United States, it was a watershed moment for Canada. Controversy surrounding the proposed FTA led to the so-called "free trade election" in 1988, in which sitting Progressive Conservative Prime Minister Brian Mulroney, who negotiated the agreement, defeated Liberal party leader John Turner, who vowed to reject it if elected. After the election, the FTA was passed by Parliament in December 1988, and it came into effect between the two nations on January 1, 1989. At the time, it probably was the most comprehensive bilateral FTA negotiated worldwide and contained several groundbreaking provisions. The agreement Eliminated all tariffs by 1998. Many were eliminated immediately, and the remaining tariffs were phased out in 5-10 years. Continued the 1965 U.S.-Canada Auto Pact, but tightened its rules of origin. Some Canadian auto sector practices not covered by the Auto Pact were ended by 1998. Provided national treatment for covered services providers and liberalized financial services trade. Facilitated cross-border travel for business professionals. Committed to provide prospective national treatment for investment originating in the other countries, although established derogations from national treatment, such as for national security or prudential reasons, were allowed to continue. Banned imposition of performance requirements, such as local content, import substitution, or local sourcing requirements. Expanded the size of federal government procurement markets available for competitive bidding from suppliers of the other country. It did not include sub-federal government procurement. Provided for a binding binational panel to resolve disputes arising from the agreement (a Canadian insistence). Prohibited most import and export restrictions on energy products, including minimum export prices. This was carried forth in NAFTA only with regard to Canada-U.S. energy trade. Many of these provisions were incorporated into, or expanded in, NAFTA. However, the FTA did not include, or specifically exempted, some issues that would appear in NAFTA for the first time. These include Intellectual property rights (IPR). The FTA did not contain language on intellectual property rights. NAFTA was the first FTA to include meaningful disciplines on IPR. Cultural exemption. It exempted the broadcasting, film, and publishing sectors. This exemption continues in NAFTA, due to Canadian concerns. Transportation services and investment in the Canadian energy sector were excluded from the FTA. These exclusions were limited in NAFTA. Trade remedies . Neither the FTA nor NAFTA ended the use of trade remedy actions (anti-dumping, countervailing duty, or safeguards) against the other. This was a key Canadian goal of the FTA. NAFTA did create a separate dispute settlement mechanism to review national decisions on trade remedy decisions, but this mechanism has not been replicated in other FTAs. Softwood lumber. The FTA grandfathered in the then-present 1986 Memorandum of Understanding (MOU) governing softwood lumber trade. However, it did not permanently settle the softwood lumber issue. Since then, the MOU has been replaced by other agreements, and, at times, by resort to trade remedy actions. Agricultural supply management . Canada was able to exempt its agriculture supply management system, although it committed to allow a small increase in imports of dairy, poultry, and eggs, which carried over into the NAFTA. Well before NAFTA negotiations began, Mexico was liberalizing its protectionist trade and investment policies that had been in place for decades (see page 9 of this report). The restrictive trade regime began after Mexico's revolutionary period and remained until the early- to mid-1980s when the country was facing a debt crisis. It was at this time that the government took unilateral steps to open and modernize its economy by relaxing investment policies and liberalizing trade barriers. The trade liberalization measures that began in the mid-1980s shifted Mexico from one of the world's most protected economies into one of the most open. Mexico now has 12 FTAs involving 46 countries. Mexico's first steps in opening its closed economy focused on reforming its import substitution policies in the mid-1980s. Further reforms were made in 1986 when Mexico became a member of the General Agreement on Tariffs and Trade (GATT). As a condition of becoming a GATT member, for example, Mexico agreed to lower its maximum tariff rates to 50%. Mexico went further by reducing its highest tariff rate from 100% to 20%. Mexico's trade-weighted average tariff fell from 25% in 1985 to about 19% in 1989. Although Mexico had been lowering trade and investment restrictions since 1986, the number of remaining barriers for U.S. exports remained high at the time of the NAFTA negotiations. Mexico required import licenses on 230 products from the United States, affecting about 7% of the value of U.S. exports to Mexico. Prior to its entry into GATT, Mexico required import licenses on all imports. At the time of the NAFTA negotiations, about 60% of U.S. agricultural exports to Mexico required import licenses. Mexico also had numerous other nontariff barriers, such as "official import prices," an arbitrary customs valuation system that raised duty assessments. For Mexico, an FTA with the United States represented a way to lock in the reforms of its market opening measures from the mid-1980s to transform Mexico's formerly statist economy after the devastating debt crisis of the 1980s. The combination of the severe economic impact of the debt crisis, low domestic savings, and an increasingly overvalued peso put pressure on the Mexican government to adopt market-opening economic reforms and boost imports of goods and capital to encourage more competition in the Mexican market.