NAFTA and the mining industry

The North American Free Trade Agreement (NAFTA), to take effect Jan. 1, 1994, will present the mining industry worldwide with a unified market with common external tariffs.

The three NAFTA partners — Canada, the U.S. and Mexico — will have a significant percentage of the world’s mineral reserves and output. The following table indicates NAFTA’s production position as it relates to some minerals:

mineral % of world output

molybdenum 75

silver 47

magnesium 48

copper 32

lead 28

zinc 27

gold 23

Increased trade among the NAFTA members has led to heavy investments among the three countries. For example, Mexico, the least industrialized of the trio, received US$30 billion of foreign investment in 1991 and US$45 billion in 1992, basically from the other partners of the agreement. Internally, logical fears exist in the three countries involving relaxation of trade barriers. The Mexican mining industry has requested several levels of protection for its zinc, aluminum, silica and iron alloy production. There is a fear that the U.S. will be an avenue for entry into Mexico of minerals from non-treaty countries.

For the Mexican mining industry, the treaty will mean the possibility of recovering competitiveness with Canada as a supplier of raw materials for U.S. industry. Since 1989, a bilateral free trade agreement has been in effect between the U.S. and Canada.

Consequently, Canada’s mineral production became more competitive than Mexico’s, even in the southern part of the U.S. despite higher transportation costs.

The treaty’s main benefit for mining is that duty will be completely eliminated on mining equipment, machinery, spare parts, reagents and chemical processes among the three countries.

In a world market characterized by a strong trend toward the formation of regional blocs, and in view of the possible failure of the Uruguay Round of GATT, this tripartite free trade agreement creates a technological pole and one of resources which, in the future, could hold a hegemonic position in some areas of mineral production.

— Prepared by the Mexican Investment Board, Mexico City.