NAFTA is an acronym for the American Free Trade Agreement, which came into being on January 1, 1994 United States; Canada and Mexico entered into an agreement. The coming up of these three counties created the world's largest free trade area. This group at present links 450 million people and producing $17 trillion goods and services. Since its inception, NAFTA has led to improved free trade which has resulted in an increase in wealth and competitiveness and thus delivering real benefits to the families, workers, farmers and many more categories of individuals within the society.
The creation of NAFTA has resulted into increase in the exports and imports within the member countries. The United States has benefited a lot from this union of three countries. Previous researches note that these countries are the second and third consumers of us manufacture products. The US also buys quite a number of goods from these countries.
These regional economic integrations benefit the countries that participate in them. Regional economic integrations can be said to be an agreement between countries found is a certain geographical location. They always come together to help reduce trade tariffs. The removal of trade tariffs helps in increasing the flow of goods and services between the member states.
Just like the NAFTA, the regional trade agreements always promote free trade. As said earlier, the member countries always have a free access to trade with other countries. However, it can also be argued that regional trade blocks tend to hinder free trade in a way. This condition prevails in instances where there are quite a number of regional trade blocks. These trade agreements in themselves tries to compete and hence reducing the free flow of goods and services.
Apart from allowing the free flow of goods within the member states of NAFTA, they also protect intellectual property rights. Another privilege that NAFTA members enjoy is that the rules and regulation of the association allow each member state to practice its environmental standards.
The NAFTA is beneficial to its members in a number of ways. A country like Mexico for instance gains from increased jobs. It is because the low cost in production is moving to the south. Arguably, it leads to more rapid economic growth. Canada and U.S are benefiting from this collaboration in a number of ways. First, they are expected to have access to the large and prosperous market. This market is mainly from Mexico. They are also benefiting from the lower prices for the consumer goods produced in Mexico. The third advantage is that they have cheap, and lastly they also have access to imports by the Mexico.
Despite all benefits relating to NAFTA, there remain a few problems with the NAFTA. The opening or removing of the trade tariffs is feared that would lead to loss of jobs, as well as a reduction in wage levels in the United States and Canada. It remains as a reason of the influx of the Mexican citizens into the two countries. The level of environmental standard in Mexico is also quite low. It would lead to increase in pollution to the two countries. Mexico remains cautious to losing its sovereignty. Arguably, the two countries control them a lot in terms of trade.
An early research showed that during the early stages of its formation, the impact of NAFTA on its member states was very subtle. NAFTA is being accredited with helping to create political instability in Mexico. The reason behind it being for Mexico to trade with the rest of the members, and they had to ensure that they offered a peaceful environment to help in trade.
Apart from the trade in goods, there was also a good service trade that was going on. Evidently, U.S. and Canadian banks were authorised to own up to 15% of the total Mexican banking market. It was around the year 1999. The individual markets within Mexico were however allowed only 1.5% of the total market. The Canadian and Mexican markets which were operating in the U.S. however continued to face restrictions that existed due to the Glass-Steagall Act. This act denied commercial banks the chance to engage in investment and banking activities (Cameron & Brian, 2000: 145).
Agriculture remains a major issue of controversy within the NAFTA constitution. Arguably, that agriculture is the only sector that was not negotiated literally. Instead of one agreement which was being signed by all the three participants, in the agricultural sector, there were three separate agreements signed. The agreement signed between the Canada, and the United States contained significant restrictions and tariff quotas were applied on sugar, dairy as well as poultry products. The pact signed by the Mexico and the United States allowed for a wider liberation within a framework of the phase-out periods.
Should there have been a single pact between the participants of the NAFTA then, it would have been very easy to come up with restrictions concerning the agricultural sector wouldn't have been there. However despite all these negative problems, NAFTA has helped to promote the economy of the member states in the long run.
Work cited
Cameron, Maxwell A., and Brian W. Tomlin. The making of NAFTA: how the deal was done. Ithaca, N.Y.: Cornell University Press, 2000. Print.
