TheNorth American Free Trade Agreement or better known as NAFTA is a treatybetween Canada, Mexico and the United States of America. More than 30 years agobilateral negotiations between Canada and the United states resulted in theUS-Canada Free Trade Agreement which became law in the beginning of 1989. Itwasn’t until 1991 where the US began bilateral talks with Mexico, which Canadalater joined. Commencing on January 1, 1994 NAFTA eliminated duties andquantitative restrictions in a progressive fashion on all products (with theexception of only a few) culminating in 2008. NAFTA marks the first time in history wheretwo developed nations signed a treaty with an emerging market county.
(Amadeo,2017) The biggest problem with the NAFTA agreement is it allows for the outsourcing of jobs to a lower labor cost Mexico market and workers who stay inthose markets are devalued and have to accept lower wages. Another issue withNAFTA is that Mexico is a known maquiladora supported country. Maquiladora is amanufacturing process where raw materials are sourced duty and tariff free formanufacturing. This is not to say that all aspects of NAFTAare necessarily bad.
As in all agreements, there are winners and losers on bothsides of the agreement. Some positives of NAFTA were that as it came intoeffect, there was a surge in investment levels across North America whichallowed for a stronger economy and growth, job creation (although this is debatable),competitive prices on imported goods along with better selection. From thebusiness side of the coin, it allowed for businesses to have greater access toraw materials, new technologies, capital and labor resources.
While the total GDP of NAFTA is around 20Trillion dollars, as we head into 2018 it is a foggy outlook in knowing howrecent renegotiations are going affect all 3 markets in the future. As threatsof the US pulling out of the agreement in favor of a better deal for theAmerican worker, Mexico and Canada not taking the threat seriously and refusingto negotiate in a meaningful way, the future outcome for the agreement ahead isup in the air. In general, the consensus is that NAFTA ultimately does hurtAmerican workers and needs to be renegotiated for a better deal. Australia New Zealand Closer EconomicAgreement or ANZCERTA, considered on of the most successful free tradeagreements came into effect in 1983.
It has been recognized by the World TradeOrganization is an ideal agreement for admiration. (Austrade.gov.au,2017)ANZCERTA removes all tariffs and importrestrictions, minimize market barriers, standardizes food standards resultingin much lower compliance costs, bilateral recognition of goods and occupationsby removing barriers and impediments for skilled labor, and the reduction ofcompliance costs for investors.
Under this agreement the agreement has resultedin an average of +6.6 % growth per year between the countries and has continuedthat trend for nearly 35 years. Central European Free Trade Agreement (CEFTA)is a trade agreement between Albania, Bosnia and Herzegovina, Macedonia,Montenegro, Serbia, Kosovo, Bulgaria, Croatia, Czech Republic, Moldova, Romaniaand Slovakia but CEFTA membership ended Bulgaria, Croatia, Czech Republic,Hungary, Poland, Romania, Slovakia and Slovenia when they became members of theEuropean Union. Originally enacted in December of 1992 it was officiallyenforced in 1994.
Its purpose was to help these countries integrate in westernEuropean institutions with the final goal of using democracy and free marketforces to help them join European political, economic and legal systems. This trade agreement is considered a steppingstone for any country that is wanting to join the European Union as it servicesas a form of preparation for membership.