Explain the North American Free Trade Agreement

Explain the North American Free Trade Agreement

Clarke Ricks School of Business,

Liberty University

BUSI 690: Policy and Strategy in Global Competition

Dr. Hicks

June 8, 2022

Explain the North American Free Trade Agreement

The North American Free Trade Agreement, abbreviated NAFTA, is an agreement between

the United States, Canada and Mexico that eliminated tariffs and duties on trade between the

taxes are called duties or tariffs, and tend to restrict trade between nations, as the additional

costs are passed along to the consumer, depressing demand for the imported products. Free

trade agreements tend to increase international commerce, but come under frequent criticism

for their detrimental impact to labor forces, established economic institutions and the

environment.

Significance

Trade between the NAFTA nations tripled from 1993 to 2007, rising from $297 billion to

$930 billion.

Time Frame

The United States and Canada previously entered into free trade agreements bilaterally in

people living in these countries for a combined gross domestic product of $17 trillion per year.

Considerations

Critics of NAFTA, such as Public Citizen, say that the flaw in creating a free trade zone of

this magnitude stems from the different levels of development between the three countries.

Under NAFTA, there are limitations to what restrictions can be placed on the import of goods,

which in turn can affect the passage and enforcement of domestic environmental and labor

laws. The benefits that USTR attributes to NAFTA may have come from other market forces

within the economy, and a sweeping eradication of all trade barriers may not have been

necessary to realize most of that economic benefit.

North American Free Trade Agreement Pros & Cons

The North American Free Trade Agreement ("NAFTA") is a 1994 agreement between the

One of the primary advantages and purposes of NAFTA was the reduction or full

elimination of taxes on imported goods between these three countries. Since 2008, all tariffs on

agricultural exports between the United States and Mexico no longer exist, and many are

eliminated between Canada and Mexico. However Canada and Mexico still tax sugar, eggs,

poultry and dairy products. The reduced or eliminated tariffs make it easier for these nations to

trade with each other.

Domestic Production

The tariff policies of NAFTA affect only goods produced directly within these three nations.

Products produced in countries outside North America still operate with tariff restrictions. This

is an important advantage for two reasons. It is an incentive for these countries to nurture their

domestic producers. But it also prevents one country from exporting goods within North

America that are purchased from another country outside North America. The policy prevents a

Mexican farmers have lost their jobs as a result of the agreement.

Immigration

It was possible that NAFTA would encourage Mexican citizens to remain in their country

since their manufacturing work could still reach the American market easily. But since the

creation of NAFTA, illegal immigration between Mexico and the United States has only gotten

worse. Over the 10-year period between 1990 and 2000, the number of annual illegal

immigrants doubled, despite the creation of NAFTA in 1994, according to Thomas Net Industry

Market Trends. That NAFTA was not more effective in preventing the immigration crisis is a

disadvantage.

Texas

The state of Texas provides the longest border between the United States and Mexico. The