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What is NAFTA?

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Different countries around the world have trade agreements with other countries. The most important and influential of all trading agreements is the North America Free Trade Agreement (NAFTA). The members of NAFTA are the US, Canada, and Mexico and it is sometimes referred to as a trilateral trading block. The reason why NAFTA is so important is that between the three of these members there is the largest GDP of any trading block in the world.

There are both similarities and differences between NAFTA and the European Union. The main similarity is that both of these agreements involve a single approach to trade between the countries. The way that the agreements differ is that most of the European Union now has a single currency.

How NAFTA Works

The North America Free Trade Agreement has been in place since 1994. It was a controversial idea, but the plan was that such a move would not only promote prosperity but also bring the countries closer together. Since the time of its introduction there has been an additional two agreements added to it; the North American Agreement for Economic Cooperation (NAAEC) and the North American Agreement for Labor Cooperation (NAALC). All these different agreements share the same basic motive which is to make it easier for business to flourish within North America.

Before NAFTA there were many complaints about the rate of tariffs between different countries in North America. This made moving products from one country to another less attractive because there would be less profit to be made. By removing many of these tariffs it encouraged businesses to sell their goods and services across the whole of North America. This is good news because it greatly increases the number of potential customers that any business will have.

The Impact of NAFTA

Even those people who were initially critical of the North America Free Trade Agreement have needed to admit that it has been successful. The increase in trade between the US and Mexico has risen dramatically in recent years as a result of this legislation. By removing high costs associated with moving products between countries a lot of businesses have been able to expand their operations. It is great for the consumer because it means that they now have access to a lot more products that are available at reasonable prices. As part of the NAFTA agreement it is now necessary to provide labels on ship goods that appear in English, Spanish, and French. This makes it a lot easier for those people dealing with the goods who don’t have English as their first language.

As well of the great successes of NAFTA there have also been some less welcome results. The rise in the number of illegal immigrants coming to the US from Mexico has been blamed on this legislation. This sudden influx of undocumented workers has led to raising concerns in some parts of the US. It has become a highly politicized topic and emotions can run high about what should be done about it.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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