To Trade or Not to Trade: Nafta and the Prospects for Free Trade in the Americas

Case #4 To Trade or Not to Trade: NAFTA and

the Prospects for Free Trade in the Americas

1. The reason for the United States, Canada and Mexico to sign the North American Free Trade Agreement is that they wanted to create a free trade relationship among the signatories of North America so as to gradually reduce the restrictions and tariffs between them and to encourage the healthy international trades among these countries. Since 1816, to protect the industries of their own countries, many governments issued protective tariffs to protect the products of their industries from being destroyed by the dumping of products from other countries. However, to retaliate, other countries would adopt similar methods and also raised their tariffs. As a result, it is costly for the products to flow between countries and manufactures, workers and others involve and the international trade between these countries became stagnant. Consequently, those economically involved wanted to change the situation and took actions to encourage the healthy trading relationships between different countries, which required the creation of certain rules and organizations to monitor the implementation of the rules. Consequently, in 1948, the General Agreement of Tariffs and Trade was firstly set up and implemented between the United States, Canada and other 21 countries to reduce the tariffs after the Second World War. Then, to form a free trade environment, Canada and the United States, as well as the United States and Mexico, both made the first step and achieved the agreement on the free trade between these two countries.

I think the sectors that will benefit most from the NAFTA would be the manufactured sectors and the agriculture sectors. In other aspect, the signatories have reduced the tariffs to the greatest extent and in a rather quick rate. As a result, the labor productivity of these two sectors in different countries will certainly be improved. Consequently, the improvement of productivity will promote the development of the sector of almost all countries around the world. For example, as a result of the implementation of NAFTA, the manufactured sector of Mexico and the agricultural sector of the United States have all been developed and the productivity of them have all been improved. Besides, the development of these two sectors will attract more resources and labor force into the sectors, which will in return boost the development of these two sectors. Therefore, I think the manufactured sectors and agricultural sectors will gain most from the NAFTA.

2. All of the signatories have benefited from the signing of the NAFTA. During the ten years after the implementation of the NAFTA, many aspects of the international trades between the member counties of the NAFTA have benefited in such aspects as trade and investment,  

In the aspect of trade and investment, the international trade of Mexico has been greatly improved and Mexico has now become the second largest trading partners of the United States. Its exports of many goods, such as machinery and agricultural products, to the United States have increased which greatly improve the manufacturing industries and the agriculture of the country and encourage the development of its economy. At the same time, its imports to the United States also increased, which can help the country to save labor in certain aspects and concentrate the working force on such aspects where they have the comparative advantage over other trading partners, such as the transport equipment and the machinery. At the same time, as the resources, the working force and the investment can be focused on the advantageous industries and the productivity of these industries has also increased. Also, after the implementation of the NAFTA, the foreign direct investment from the United States to Mexico has also increased and many American companies have invested in Mexico,