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ECON 5705 NAFTA EU PAPER Brendan O’Neal

ECON 5705 NAFTA EU PAPER Brendan O’Neal -...

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Brendan O’Neal ECON 5705 Final Paper NAFTA and the EU According to the business dictionary, a free trade agreement is a treaty between two or more countries that enables the involved parties to trade goods and services across borders without tariffs; capital and labor may not move freely across these borders, in contrast with a common market. The members of a free trade agreement may impose taxes and tariffs to non-member countries in order to trade and conduct business with them. Two major free trade agreements include the North American Free Trade Agreement and the European Union, respectively NAFTA and the EU, herein. This paper is intended to inform the reader and compare, and contrast the differences between NAFTA, EU, and the MAI; some other trade agreements may be used for reference points and how these multi-national agreements impact their respective nations. The North America Free Trade Agreement (NAFTA) was put into action on January 1, 1994; like any other multinational agreement there are pros and cons. The intention of NAFTA is to open up trade between the countries in order to improve the standard of living and the economic growth in the three involved countries. The agreement under NAFTA eliminated tariffs between the countries. In 1988 the United States and Canada entered into an agreement in order to negotiate free trade; shortly after, Canada initiated the agreement with Mexico, eventually entering the three countries into what was to become NAFTA. The agreement immediately eliminated tariffs on more than half of US imports from Mexico and more than a third of US exports to Mexico (Wikipedia, 2010). Most United States to Canada trade has been duty free. Many
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economists have looked at NAFTA’s positives and negatives. Some of the positives of NAFTA include the benefits that it has brought to Mexico; Mexico’s poverty has dropped while the income of its residents has risen. Mexico’s food prices have dropped due to this change in the balance of wealth. There are some that feel that because of the impact that NAFTA has had on business, business owners in all three countries have benefited while farmers have seen the negative of the trade agreement due to the fallen prices of food. Critics have stated throughout the literature that workers in the United States have suffered due to the loss of manufacturing jobs and that NAFTA has further contributed to the inequality between classes in the United States and Mexico. It seems that economists do agree that NAFTA is not enough to substantially reduce poverty throughout the countries involved, especially Mexico. It seems that Mexico would benefit from investing in education and governmental infrastructure. NAFTA’s impact is seen throughout the three nation’s agriculture, industry, environment, and the mobility and immigration of the persons within the nations. The New York Times reported that NAFTA was to create wealth, stimulate jobs, and encourage economic activity throughout the continent (Jackson, 2007). Three years after its ratification, the Clinton administration did not give
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