The US, Canada and Mexico’s Free Trade Agreement

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Table of Contents

Chronology of Trade Between the U.S., Canada, and Mexico
Implications of NAFTA Today
Comparison and Contrast of the Trans-Pacific Partnership and NAFTA
Conclusion
Lessons Learned and Recommendations
References

The development of trade relations in North America has always been an integral part of the interaction of countries within this continent. Due to the fact that there are several countries considered to be the most densely populated on the territory of this part of the world, the platform for creating a market base is fruitful enough. The creation of a special trade union among the countries of North America is quite a logical process, and the leaders of the countries should certainly strive to strengthen relations with their neighbors. The purpose of this work is to track the history of the development of trade relations between the largest countries on the North American continent and to assess the effectiveness of such association as the North American Free Trade Agreement (NAFTA). The paper includes some ideas of some respected authors and touches on such issues as the chronology of trade development, the results of union formation, a critical evaluation of the effectiveness of such a partnership, as well as possible recommendations based on the information provided.

Chronology of Trade Between the U.S., Canada, and Mexico

The idea of organizing a trade zone inside North America was planned several years before the signing of the corresponding document. The prototype of NAFTA was the agreement signed between the US and Canada in 1988 (Komar, Uniiat, & Lutsiv, 2016). This fact was promoted by long-standing economic ties that had been formed in last century. The signed agreement between the US and Canada that was called CUSFTA came into force in 1989 (Komar, Uniiat, & Lutsiv, 2016). The basic thesis of this agreement was the creation of a free trade zone between these two countries. It was provided for ten years.

A year later, negotiations began between the countries participating in the agreement. The aim was to attract Mexico, another big country to the association. Thus, as Beghin (2015) notes, since 1994, the North American Free Trade Agreement (NAFTA) has entered into force. This document was signed with the aim of strengthening and expanding foreign economic relations of each country. The main principle is the absence of obstacles and various types of discrimination in mutual investment and trade. Also, the members of the association support some of their producers, banning the importation of other countries’ products that not included in the agreement. It applies, for example, to cars or textile products. One of the central features of NAFTA is that economic relations at the level of small corporations first developed, and only then, based on their development, large international agreements were concluded.

However, despite a rather strong alliance for more than 20 years of the association’s existence, there have already been several conflicts over the regulation of trade relations. It is perhaps because of the fact that the dominant position in the NAFTA agreement belongs to the US. The American economics significantly exceeds the economics of the other two participating countries. Therefore, the unification of power in the hands of one state, on the one hand, simplifies management, but on the one hand, creates the ground for some controversial situations.

Implications of NAFTA Today

Despite the fact that the United States economics is one of the strongest in the world community, the participation in the agreement has brought significant benefits to the country. One of the primary advantages is the purchase of materials and goods from Canada and Mexico at more affordable prices than in the US. Also, America’s participation in the trilateral agreement has made it possible to significantly expand foreign trade relations and enter new markets. Thus, according to Beghin (2015), the US trade with the participating countries has grown almost twice. However, despite many positive aspects, employers, trade unions, and some members of the government are worried about the issue of moving large-scale industries to countries with less developed economies and wages.

The participation of Mexico in this economic agreement has brought good benefits for the country. More than 80% of the goods produced in the country of goods are exported to the markets of the USA and Canada (Komar, Uniiat, & Lutsiv, 2016, p. 284). Due to this association, a powerful infusion of finance has occurred in Mexico’s economics. Investments have almost doubled. On the territory of this country, the USA and Canada place their largest factories and manufactures.

Canada is an active supporter of attracting new members from North and South Americas to the agreement. This country’s leaders actively discuss the possibility of future cooperation with Chile and Argentina (Aggarwal, 2013). Canada participates in multilateral projects and agreements not only with the NAFTA countries. The union, nevertheless, has given a powerful impetus to the country’s economics. The exports of Canadian products have almost doubled. At the same time, the major share of sold goods comes from the automotive industry.

Comparison and Contrast of the Trans-Pacific Partnership and NAFTA

When comparing the Trans-Pacific Partnership (TTP) and NAFTA, both these agreements are directly related to the organization of trade unions. However, the TTP has significantly wider borders and covers countries of more than one continent. Also, according to Thow et al. (2015), the specificity of almost any association is that successful regional multilateral projects are created on the basis of developed economic ties. However, when it is about the TTP, the situation is different since many of the negotiators are not promising economic partners for one another. It means that potential cooperation can only be documented, but both sides will not have actual benefits.

Nevertheless, there are certain similarities between TTP and NAFTA. As Gutu (2016) remarks, “if the agreements are concluded, a major global impact on trade and investments is expected, with significant positive implications for the TPP and TTIP negotiating states” (p. 81). It means that an essential share of exports can considerably strengthen the economies of individual countries and establish a mutually beneficial partnership. The spheres of cooperation will be very broad in comparison with NAFTA. However, in case of competent work, it can bring a significant profit to all the participants of the union if disagreements are avoided.

Conclusion

Thus, the creation of a trade union among the countries of North America is the process that is natural and logical and can strengthen relations among the states included in this association. The prerequisites for the creation of NAFTA were noted at the end of the twentieth century when the leaders of the countries discussed the need for mutually beneficial cooperation. The consequences of signing the agreement are quite significant for all the participants of this organization. There are certain similarities and differences between the North American Union and the TTP, which includes quite a few countries.

Lessons Learned and Recommendations

For productive and mutually beneficial cooperation, it is essential to ensure that all the members of the trade union without exception have equal rights. The desire for dominant positions adversely affects the perception of the quality of such an association. Also, certain conditions should be developed so that countries could have access to cooperation with one another and not just with their closest neighbors. If these conditions are met, cooperation will certainly be fruitful and successful.

References

Aggarwal, V. K. (2013). US free trade agreements and linkages. International Negotiation, 18(1), 89-110.

Beghin, J. C. (2015). NAFTA: Implications for Mexican and Midwestern agriculture. Iowa Agriculture Review, 7(1), 8-12.

Gutu, I. (2016). The TPP and TTIP trade agreements: The international negotiation process. CES Working Papers, 8(1), 81-92.

Komar, N., Uniiat, A., & Lutsiv, R. (2016). Efficiency of the North American free trade zone. Journal of European Economy, 15(3), 279-293.

Thow, A. M., Snowdon, W., Labonté, R., Gleeson, D., Stuckler, D., Hattersley, L.,… Friel, S. (2015). Will the next generation of preferential trade and investment agreements undermine prevention of noncommunicable diseases? A prospective policy analysis of the Trans Pacific Partnership Agreement. Health Policy, 119(1), 88-96.

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