NAFTA-North American Free Trade Agreement and EU-European Union
The European Union is the result of the devastation of two world wars on Western European and the desire for a lasting peace. It is the result of the desire by the European nations to hold their own on the world’s political and economic stage.
EU has produced the following benefits globally
1. Firms and individuals should save by handling one currency rather than many.
2. Consumers should find it easier to compare prices across Europe.
3. Producers should become more efficient as they reduce their production costs so as to maintain their profit margins.
4. The highly liquid pan-European capital market should get a strong boost.
5. The range of investment options open both to the individuals and institutions should increase.
6. Since its establishment, the EU has had a volatile trading history with the US dollar.
7. Initially, the Euro was valued at $ 1.17 then fell in value relative to the dollar but it strengthened to an all time high of $ 1.54 in 2008 and awards. NAFTA (North American Free Trade Agreement) between the US. Canada and Mexico became law in 1994. It was formed for the following reasons:
(a) It abolished tariffs on 99 percent of goods traded.
(b) It removed barriers on the cross-border flow of services and protects intellectual property rights.
(e) It allows each country to apply its own environmental standards, (d) It establishes two commissions to impose fines and remove trade. privileges when environmental standards or legislation involving health and safety, minimum wages or child labour are ignored. NAFTA has produced the following significant benefits globally:
(1) Mexico will benefit from increased jobs as low cost production
moves south and will attain more rapid economic growth as a result.
(ii) The US and Canada will benefit from the access to a large and increasingly prosperous market and from the lower prices for consumers from goods produced in Mexico.
(iii US and Canadian firms with production sites in Mexico will be more competitive on world markets. Studies of NAFTA’s early impact suggest that both of the advocates and the detractors have been guilty of exaggeration.
(a) Trade between the three countries has increased by 250 percent.
(b) The members have become more integrated.
(c) Productivity has increased in member nations.
(d) Employment effects have been small.
(e) Mexico has become more politically stable.
Thus, NAFTA has produced significant net benefits globally. Proponents of NAFTA argue that the agreement should be viewed as an opportunity to create an enlarged and a more productive base for the United States, Canada and Mexico. As low income jobs move from Canada and the United States to Mexico, the Mexican economy should be strengthened giving Mexican consumers the ability to purchase higher cost American products. The net effect of the lower income jobs moving to Mexico and Mexico increasing its imports of higher quality American goods should be positive for the American economy. In addition, the international competitiveness of US and Canadian firms that move production to Mexico to take advantage of lower labour costs, will be enhanced enabling them to better compete with Asian and European rivals.
