NAFTA Vs. The EU NAFTA History and Essay

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NAFTA vs. The EU

NAFTA

History and formation of the trade bloc

The North American Free Trade Agreement (NAFTA), a free trade agreement uniting Canada, Mexico, and the United States, was signed in January 1994 by Democratic President Bill Clinton. The intention of the agreement was to eliminate most of the tariffs on products traded between these three nations. The tariffs were phased out gradually, and the full agreement was not realized until 2008. The industries that felt the greatest impact due to NAFTA were agriculture, textiles and automobiles. "NAFTA also implemented intellectual-property protections, established dispute-resolution mechanisms, and put into place regional labor and environmental safeguards, though some critics now lobby for stronger measures on this front" (Teslik 2008).

The role that the countries involved in the trade bloc play in the global economy

The U.S., Canada, and Mexico have the number one, 9th, and 14th largest GDPs of all of the world's countries. Even though they are not as wealthy as the U.S., Canada and Mexico remain major economic players, because of Canada's vast oil wealth and Mexico's regional importance within Central and Latin America.

The impact of belonging to the bloc on each country's government

The merits of NAFTA were hotly debated during the 2008 Democratic presidential primaries, as Barak Obama and Hillary Clinton vied for the votes of white, working-class voters who believed they had lost jobs due to NAFTA. It is true that U.S. trade with Mexico was already growing before NAFTA's implementation as was U.S.-Canada trade (Teslik 2008). However, after NAFTA's implementation, "regional business investment in the United States rose 117% between 1993 and 2007, as compared to a 45% rise in the fourteen years prior. Trade with NAFTA partners now accounts for more than 80% of Canadian and Mexican trade, and more than a third of U.S. trade" (Teslik 2009). Canada and the United States also had a free trade agreement before NAFTA was instituted

The economic impact of the trade bloc on the countries involved.

It has been alleged that "Mexican growth has underperformed expectations. Since 1994, Mexico's GDP has increased at an average annual rate of 2.7%, below the average growth rates of 3.3% and 3.6% in the United States and Canada" (Teslik 2009). But Canada's GDP has grown faster rate than either Mexico's or the United States' post-NAFTA (Teslik 2009).

What the alternatives to membership in the trade bloc are for its member countries.

Personal trade agreements between the two nations offer one potential alternative, as existed before NAFTA.

What issues the trade bloc has with other trade blocs

It was feared that because of increased trade between the U.S. And Mexico, members of Mercosur (Common Market of the Southern Cone) would be negatively effected. "The growth rate of U.S. exports to selected Latin American countries as well as to all Latin American countries as a whole declined after NAFTA came into effect. However, the growth rate of U.S. imports from Latin American counties increased" and the general effect was neither that of a net loss or gain. (Impact of NAFTA on U.S. trade with Latin American countries, 2002, South Dakota Business Review).

Whether or not the trade bloc or any countries in the trade bloc have had a conflict with the World Trade Organization (WTO) or brought any disputes to the WTO.

The U.S. dolphin-safe labeling provisions "prohibit tuna sellers from labeling their products as 'dolphin safe' if the tuna is caught by intentionally encircling ('setting on') dolphins with purse seine nets. Mexican fishing vessels use this technique to fish for tuna," causing Mexico to bring issue to be brought up before the WTO (Issues, 2009, USTR). NAFTA demands consistent labeling between the U.S., Mexico, and Canada. The U.S. eventually appealed Mexico's choice of venue, and demanded that the dispute be held in a NAFTA Free Trade Commission hearing.

How the trade bloc impacts you as a consumer

NAFTA increases the free flow of cheaper goods from Mexico into the U.S. And makes it easier for American manufacturers to make use of less expensive foreign labor. It also enables an easier flow of commodities and raw materials from both Canada and Mexico. Prices are reduced, but the effects can also result in the direct loss of American jobs and threaten domestic industries.

The European Union

History and formation of the trade bloc

"The evolution of what is today the European Union (EU) from a regional economic agreement among six neighboring states in 1951 to today's hybrid intergovernmental and supranational organization of 27 countries across the European continent stands as an unprecedented phenomenon in the annals of history" (EU, 2011, CIA Fact Book).

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Ever since the end of World War II, there has been a drive to greater integration within Europe. However, what is today the European Union only came into full fruition after the 1993 single market Maastricht' Treaty on European Union in 1993 and the Treaty of Amsterdam in 1999 were signed by the founding companies (2000-Today, 2011, Europa).

The role that the countries involved in the trade bloc play in the global economy

The EU comprises some of the most powerful nations in Europe, including Germany, France, Italy, the Netherlands, and Sweden. It contains many smaller powers, such as Belgium and Luxemburg. Some of the Southern European nations, however, such as Italy, Greece, Spain, and Portugal have pursued questionable financial policies and given rise to accusations that they have potentially damaged the solvency of the EU. "On the fringes of the single-currency zone Greece, Ireland and Portugal have become ensnared in a sovereign-debt crisis. But in its northern core, driven by the German powerhouse, economies are reviving and public finances are solid. Now many fear that the economic divide could turn into a political chasm," particularly given the resentment of the Northern EU players at having to 'bail out' what is seen as their irresponsible Southern cohorts (Europe's diverging economies, 2011, May 17, The Economist).

The EU also comprises members of the former Warsaw Pact, including the Czech Republic, Poland, Bulgaria, and Romania. Nations that remain candidates for membership include Croatia, the Former Yugoslav Republic of Macedonia and Turkey, the latter of which has remained questionable because of the fear of Islamic fundamentalism within the nation.

The impact of belonging to the bloc on each country's government

The creation of the EU was praised for doing away with inefficient restrictions between the borders of European nations regarding the free flow of goods and capital. However, the 'bail-outs' of Greece and shaky economies of other nations have made Northern European electorates "growing restive over the apparently endless bail-outs. A recent poll in Germany showed that only 20% thought the rescue of Greece was right; 47% said it was wrong" (Europe's diverging economies, 2011, May 17, The Economist).

The economic impact of the trade bloc on the countries involved

Belonging to the EU was initially seen as uniformly salutary for all members. Powerful nations such as France and Germany could compete with the U.S. As part of the EU, thanks to their increased size as a united entity; regional cooperation was increased and inefficient tariffs and regulations were eliminated, and smaller nations such as Ireland were bolstered thanks to the uplift of belonging to the trade bloc. However, the currency integration has meant that poorer nations that have been less fiscally responsible, such as Greece, cannot devalue their currency to increase the attractiveness of their goods and services (Europe's diverging economies, 2011, May 17, The Economist).

What the alternatives to membership in the trade bloc are for its member countries

One alternative actively pursued by Great Britain is membership in the EU without integrating its currency.

What issues the trade bloc has with other trade blocs

Recently, Libyan leader Gaddafi stated that he and other "African leaders who say Europe is trying to make them open their borders to trade but not giving enough in return," (Lowe 2010). Until the Greek solvency crisis, other nations and blocs feared that the massive entity would be difficult to compete with; now there is a fear that the EU has become so large, suffering in one of its nations could spread like a contagion throughout the world economy.

Whether or not the trade bloc or any countries in the trade bloc have had a conflict with the World Trade Organization (WTO) or brought any disputes to the WTO

There have been numerous disputes between the WTO and other entities. The most recent dispute was when the WTO "ruled against China's export restrictions of certain raw materials backing a case jointly brought by the EU, U.S. And Mexico. The WTO Panel has found that China's export restrictions were not justified on environmental grounds and should be removed. Today's WTO decision was welcomed by Europe's trade chief" (EU, 2011, ETC).

How the trade bloc impacts you as a consumer

The recent credit crisis in Greece has manifested itself in continued market instability in the U.S. Until recently, the dollar was notably weaker than the Euro….....

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