The North American Free Trade Agreement ( 1, 2) is a trilateral trade bloc in North America created by the governments of the United States, Canada, and Mexico. The agreements were signed in December 1992 by the leaders of the three countries — Brian Mulroney of Canada, Carlos Salinas de Gortari of Mexico, and Bill Clinton of the United States but did not come into effect until January 1, 1994. In terms of combined purchasing power parity GDP of its members, the trade bloc is the largest in the world and second largest by nominal GDP comparison.

The North American Free Trade Agreement (NAFTA) has two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labo(u)r Cooperation (NAALC).

North American Agreement on Environmental Cooperation

The North American Agreement on Environmental Cooperation (NAAEC) was a response to environmentalists' concerns that the United States would lower its standards if the three countries did not achieve consistent environmental regulation. The NAAEC only obligates parties to enforce their own environmental laws. The NAAEC, in an endeavour to be more than a set of environmental regulations, established the North American Commission for Environmental Cooperation, a mechanism for addressing trade and environmental issues, the North American Development Bank (NADBank) for assisting and financing investments in pollution reduction, and the Border Environmental Cooperation Commission (BECC). The NADBank and the BECC have provided economic benefits to Mexico by financing 36 projects, mostly in the water sector.

North American Agreement on Labo(u)r Cooperation

The North American Agreement on Labo(u)r Cooperation (NAALC) supplements NAFTA and endeavors to create a foundation for cooperation among the three countries for the resolution of labor problems, as well as to promote greater cooperation among trade unions and social organizations in order to fight for improved labor conditions.

Further integration

While different groups advocate for a further integration into a North American Community, sensitive issues have hindered that process. The three countries have pursued different trade policies with non-members (for example, Mexico has signed FTAs with more than 40 countries in 12 agreements), making the possibility of creating a customs union difficult to accomplish. Former President Vicente Fox of Mexico had promoted the idea of enhancing NAFTA (into what he labeled "NAFTA-Plus", or possibly a North American Community), but after the September 11, 2001 attacks, priorities in the United States changed. The Security and Prosperity Partnership of North America was signed, instead, as a separate and unrelated agreement.

Given the scope of the agreement, which includes very sensitive issues in trade talks such as agriculture liberalization and environment regulation, few countries have shown interest in joining NAFTA. Instead, some countries, like Chile, preferred to negotiate three separate bilateral agreements with the three current NAFTA members, with different restrictions to liberalization of their industries and the regulation of environment protection. Jamaica and Trinidad and Tobago also showed a similar interest.