NAFTA: The North American Free Trade Agreement

Introduction

NAFTA is a synonym standing for the North American Free trade Agreement. It is the world’s largest trading bloc covering Mexico, the United States, and Canada. It was launched in 1993 for the purpose of enhancing North America’s competitive advantage in international trade in terms of reduced trading costs, and increased investment. President George Bush and Prime Minister Brian Mulroney signed the NAFTA agreement in 1992. It was later approved by legislatures from the three trading countries in the preceding year. President Bill Clinton signed the agreement into law in December of 1993 although it was implemented in January 1994 (Foreign Agricultural Service, p. 2).

The three trading countries have to play some significant roles within NAFTA. For example, NAFTA requires its members to observe discipline on the enforcement and implementation of hygienic and phytosanitary procedures. The purpose of these procedures is to ensure a healthy condition free from contaminants, diseases and pests. They are also expected to establish the obligatory level of protection.

NAFTA was expected to eliminate trading barriers, promote competitive advantage, create opportunities for investment, and establish a platform for resolving disputes. By 2008, the three trading countries were already enjoying free trade. It has linked over 444 billion people and its gross domestic product has significantly increased to $17 trillion. In particular, U.S. GDP is estimated to have increased by more than 0.5% per year. In the period 1993 to 2007, trade among NAFTA members increased from $297 million to $1 trillion. Americans’ exports to both Mexico and Canada augmented by more than three times while exports to these two countries to the United States augmented to approximately $568 billion from about $151 billion. Trade was facilitated by members’ ability to contract on government proposals (Amedeo, p. 5). NAFTA members have an alternative of expanding their membership to the UK.

NAFTA has impacted the governments of the three trading partners in various ways. For example, it has led to a stable political government in Mexico as well as Canada. United States government has also benefited from NAFTA through the stabilization of its legislature. Economically, NAFTA has eliminated Mexican’s high tariffs thereby boosting agricultural exports from the U.S. to Mexico. It has also enabled growth in Foreign Direct Investment (FDI) among the three trading countries (Foreign Agricultural Service 3). Mexico and Canada signed a bilateral agreement with the aim of increasing market access for farm products. This agreement removed most of the trade barriers that hindered these countries from earning maximum returns from agricultural products.

NAFTA has issues with other trading blocs because it is the world’s largest economic integration comprising of the world’s largest economies. By eliminating tariffs among member countries it makes imports from other counties expensive affecting the economic stability of other non-member countries. NAFTA has never had any conflicts with WHO because it has already made stipulations to the member countries to work in accordance with WHO requirements. The trade bloc (NAFTA) has benefited individual customers through the provision of a wide variety of products. I now have a wide range of products to choose from which come with reduced prices. Personally, I think that NAFTA should consider expanding its membership to develop as well as the developing nations as this will help boost the global market. For example, it should consider the inclusion of the UK into the trade bloc.

European Union

European Union is a political and economic union located in Europe with a membership of 27 states. It is one of the oldest trading blocs and can be compared to NAFTA in terms of performance. It is ruled by 7 institutions. EU was recognized in 1993 by an agreement called Maastricht subsequent to the establishment of the European communities. EU was formed for the purpose of regional integration. In 1995, Sweden, Australia and Finland joined the union. Member counties have a role to play in meeting the Copenhagen criterion which was recognized in 1993 at the Copenhagen European council. By looking upon the decisive factor, a member country has to value human rights, regulations, have a market economy that is able to participate in the EU market and recognize the responsibilities that bind a country as a member of the EU such as the EU law (Brady, p. 6).

European Union entitles all citizens of the 27 member states the freedom of living, traveling and working in any country that they may choose. The citizens are free to travel anywhere, choose when to work and when to retire or where to reside without encountering any problems in any member county. The choices that are provided by the EU can not be found in any other individual country. There is free movement of people, goods and services and money. Just like NAFTA, the EU has an alternative of expanding its membership to the UK.

Member countries have benefited from better medical facilities which have resulted in an increase in life expectancy at birth and it is expected that a girl child can live for more than 81 years and for boys about 75 years. Fertility levels have been low resulting in demographic aging in the population of the EU. The ratio of the older generation is becoming higher compared to that of the working age. Unemployment rates have declined though we still have a higher number of young people being unemployed (Bernal, p. 30).

Since the 1930s, the EU has been experiencing periods of economic recession which is expected to continue with a shrinking GDP. There has been evidence of some signs of economic improvement although the recovery process is still uncertain. In December 2008, the European Economic Recovery Plan (EERP) was launched which was to help restore and stabilize the economy (European Commission, p. 3). Patterns of integration have been affected on matters of security, economic development, and the levels of agriculture. The majority of the states that have recently been incorporated in the union are poorer than the existing ones and have contributed to the drain in the economy (Levy, p. 1). However, the EU has not had any issues with other trading blocs although it has had issues with WHO due to the poor standards of living of the member countries. EU affects me as a customer through the provision of a wide range of products and has been traveling easier from one country to another.

Globalization

Globalization is a process of integration of regional economies and cultures into a global network of trade. Nations integrate into the international market in terms of technology, trade, capital flows or investments. Economic integration has made international trade easier through the removal of trade barriers and tariffs. With economic integration, good and services, labor and capital find their way in the country where they are put into maximum use. This results in economic growth and development. The world economy has been going through high integration rates through market forces and at the same time, economic and social disparities among nations are on the increase (Shniad, p. 2).

There has been an increase in the mobility of factors of production making trade easier. Today, the global economy has increased to significant levels and all this has been facilitated by trading blocs such as NAFTA and European Union. American is one of the countries that have a major impact on the global market. It is a developed country that exports large volumes of goods to the trading countries thus enhancing international trade. It is politically stable and economically advanced with a stable currency.

Works Cited

  1. Amedeo, Kimberly. “What are the advantages of NAFTA?” economy, 2008.
  2. Bernal, Richard L. Trade Blocs: Regionally Specific Phenomenon or a Global Trend? Washington, D.C.: National Policy Association, 1997.
  3. Brady, Hugo. “EU Migration Policy: An A-Z.” Centre for European reform.
  4. European Commission. “Economic crises in Europe. Causes, consequences and responses.” European economy, 2009. Web.
  5. Foreign Agricultural Service. “North American Free Trade Agreement (NAFTA).” United States Department of Agriculture, 1998.
  6. Levy. Dean. “Political consequences of European’s union enlargement.” European Union, 2010.
  7. Shniad, Sid. (1997). “UNCTAD sounds warning on globalization.United Nations Conference on Trade and Development, Geneva, press release, Web.