Economic Integration Agreements: Analysis and Implications

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Table of Contents

Basis for the EIA Support and Their Specific Benefits
NAFTA: The Main Economic Bloc for the United States
Advantages of NAFTA for the United States
Disadvantages of NAFTA for the United States
Reference List

Basis for the EIA Support and Their Specific Benefits

Having become a rather frequent occurrence in the environment of the global economy of the 21^st century, economic international agreements (EIA) have reasons for being values so high by their members (Cooper, 2014). The countries that participate in EIA receive a significant economic support from every single member of the economic bloc, therefore, enjoying a range of opportunities for economic evolution. In addition, the states involved in the agreement could receive assistance from the EIA members in case of a local economic crisis (Baldwin & Jaimovich, 2012). The specified condition is especially important for the states that can be characterized by their unstable political, economic or financial status (Daniels, Radebaugh, & Sullivan, 2011). Finally, the fact that EIA allow for a multilateral free trade (Daniels et al., 2011) deserves to be listed among the key reasons for signing EIA.

NAFTA: The Main Economic Bloc for the United States

At present, the North American Free Trade Agreement, also known as NAFTA, is the key economic bloc that defines most of the states economic processes and determines the rates of the state economic growth. Signed in 1994 by the U.S., Canada and Mexico, it changed the scope of the North American economy forever (Daniels et al., 2011). To be more specific, it was the development of linked economies of the United States, Canada and Mexico that strengthened the position of the U. S. in the world economy and created sold premises for the future growth.

Second, the fact that the NAFTA development caused the U.S. small and medium entrepreneurships (SMEs) to evolve and enter new market environments (Daniels et al., 2011), can be viewed as one of the most important effects of signing the agreement. More importantly, NAFTA presupposed that business investors could gain international rights and, thus, become globally significant (Daniels et al., 2011). Consequently, NAFTA can be considered one of the key premises for the creation of global economy and the global market (Daniels et al., 2011).

Advantages of NAFTA for the United States

Though the positive effects of the NAFTA agreement implementation were not immediate, they still had an impressive effect on the U.S. economy, boosting it greatly. The creation of one of the largest free trade areas in the world and the removal of political and economic boundaries between the states did leave to a vast rejuvenation of the U.S. economy (Daniels et al., 2011).

A quick and significant rise in the role of SMEs in the American economy is the next most important effect of the NAFTA implementation (Daniels et al., 2011). By causing a spur of the national economy, NAFTA contributed to the development of the local entrepreneurships and the investment into the emerging entrants to the American market.

Disadvantages of NAFTA for the United States

It would be wrong to assume that the NAFTA agreement has only resulted in positive implications for the United States. A vast flood of poorly skilled labor force from Mexico and the following increase in the U.S. citizens unemployment rates are, perhaps, the key problems that NAFTA has triggered in the U.S. economy. Another problem caused by the NAFTA agreement concerns a major change in the U.S. wages the latter dropped significantly after the agreement came into effect. The specified phenomenon is quite predictable, as the process of trade liberation leads inevitably to the escalation of investment and the subsequent search for the most favorable options for the investors, which in no way involved compliance with rather high salary standards set by the U.S. employees (Daniels et al., 2011). The Mexican population also faced significant challenges. The Mexican farmers, for example, had to deal with a severe crisis, putting the farming industry on a long hiatus (Besedes, 2012). Nevertheless, the threat, which the NAFTA created, did not have a statistically meaningful effect.

Reference List

Baldwin, R. & Jaimovich, D. (2012). Are free trade agreements contagious? Journal of International Economics, 68(1), 116. Web.

Besedes, T. (2012). The role of NAFTA and returns to scale in export duration. CESifo Economic Studies, 59(2), 306336. Web.

Cooper, W. H. (2014). Free trade agreements: Impact on U.S. trade and implications for U.S. trade policy. Current Politics and Economics of the United States, Canada and Mexico, 16(3), 425445. Web.

Daniels, J., Radebaugh, L., & Sullivan, D. (2011). International business (13th ed.). Upper Saddle River, NJ: Prentice Hall. Web.

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Economic Integration Agreements: Analysis and Implications

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