Lecture 17&18 - Economic Integration in NA

Lecture 17&18 - Economic Integration in NA - Econ....

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Econ. Integration in N America Economic Integration in North America North American Free Trade Agreement - NAFTA - It’s a free trade agreement not a customs union, which branches out into an economic union - Officially began in January 1994, although Canada was already trading goods with Mexico and the United States - NAFTA represents about 28% of the world’s GDP ($11.3 trillion) - The United States biggest trading partners, in order as of now are: o China o Canada o Japan o Mexico - When considering imports/exports Mexico almost relies on the US just as much as Canada does - Canada as a country has large land mass, but relatively small in population - As a potential question, should North America have a common currency? Realistically the United States would never allow Canada to provide decision making on their monetary policies, or give up their dollar to share ours. If North America were to share a common currency we would have to adopt the United States dollar. Relationship with Canada and the United States - Both high income, industrialized countries; very well established (Avg. Canadian income is 85% of what the average American) - Auto Pact – 1965 (trading automobiles and car parts between both countries) o Dealt with GM, Ford, Chrysler manufacturers o Cars produced in Canada tended to be more expensive than those that were produced in the US; due to economies of scale - By having the free trade agreement it has increased productivity - Canada/US Free Trade Agreement – 1989
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Econ. Integration in N America o Advantages Fear of US protectionism This would force Canadian firms to become more competitive; increase Canadian productivity o Disadvantages Canadian firms might not be able to compete
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Lecture 17&18 - Economic Integration in NA - Econ....

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