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The impact of the North American Free Trade Agreement (NAFTA

The purpose of this discussion is to examine the impact of the North American Free Trade Agreement (NAFTA) on Canada. The key underlying question is, does free trade offer a route to increased prosperity for Canada, or does it threaten environmental and labor standards? This discussion will focus on the negative impacts of NAFTA from two main fronts: the negative impact on trade and negative impact on employment.

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The purpose of this discussion is to examine the impact of the North American Free Trade Agreement (NAFTA) on Canada. The key underlying question is, does free trade offer a route to increased prosperity for Canada, or does it threaten environmental and labor standards? This discussion will focus on the negative impacts of NAFTA from two main fronts: the negative impact on trade and negative impact on employment.

The North American Free Trade Agreement (NAFTA) is a pact that calls for the gradual removal of tariffs and other trade barriers on most of the good produced in North America.

A tariff is essentially a tax on consumption that raises the price of imported good and services.

The agreement became effective on January 1st, 1994 in Canada, United State and Mexico and it forms the world's second largest free-trade zone bringing together approximately 365 million consumers in the three member countries.

Former negotiations to expand NAFTA to include Chile began in 1995 but the administration of President Bill Clinton was unable to conclude and opted to maintain the agreement between the three initial members.

The concept of NAFTA borrows heavily from the works of Adam Smith. Smith convincingly demonstrated in The Wealth of Nations (1776) that, individuals are better off if they specialize instead of trying to be economically self sufficient; Likewise, countries are better off if they exchange the services and products they are relatively good at producing for those things that other countries are relatively better at producing.

From the onset, many people from the member states were apprehensive of the new agreement, many feared that jobs would be lost because NAFTA would facilitate the movement of US production plants to Canada and Mexico where plants would take advantage of abundant and cheaper labor and lax enforcement of environmental and workers rights. Environmental groups were concerned that pollution and food safety controls would be more difficult to enforce and could be challenged and eliminated on the ground that they were trade barriers. In response, two supplementary agreements were added to the former treaty; one addresses environmental issues and the other labor issues.

NAFTA was intended to lower barriers to trade in Mexico, United States, and Canada. The projected effect of the agreement was and is that the three countries involved benefit from the increased exchange of goods. New markets for goods were anticipated to result in augmented industry as well as enhanced access to cheaper goods and services. While the net economic impact of NAFTA to the three countries may be positive, models of international trade envisage that certain segments of the economy in each country benefit from the agreement while others lose.

People from different nations have bought and sold from each other for centuries but rarely have they traded fairly; historical evidence points out, countries have traded goods made at abroad differently from good made at home, primarily by changing taxes and tariffs on exported goods.

The concept of free-trade is borne when nations sign and agree to reduce or eliminate trade tariffs and quotas. Activists from the three member countries have often criticized free trade on the grounds that businesses are simply attempting to exploit low-wage labor and that free trade does not, as many proponents argue, create jobs. On the contrary, although exports create jobs, imports frequently destroy then so that there is no net gain.

Economists argue that the negative impact on employment by enforcing NAFTA is evident taking into consideration that free trade does not change the composition of employment. Instead, as trade barriers decline, workers in industries that are no longer competitive in the regional and ...

Solution Summary

The agreement became effective on January 1st, 1994 in Canada, United State and Mexico and it forms the world's second largest free-trade zone bringing together approximately 365 million consumers in the three member countries.

Former negotiations to expand NAFTA to include Chile began in 1995 but the administration of President Bill Clinton was unable to conclude and opted to maintain the agreement between the three initial members.

The concept of NAFTA borrows heavily from the works of Adam Smith. Smith convincingly demonstrated in The Wealth of Nations (1776) that, individuals are better off if they specialize instead of trying to be economically self sufficient; Likewise, countries are better off if they exchange the services and products they are relatively good at producing for those things that other countries are relatively better at producing.

From the onset, many people from the member states were apprehensive of the new agreement, many feared that jobs would be lost because NAFTA would facilitate the movement of US production plants to Canada and Mexico where plants would take advantage of abundant and cheaper labor and lax enforcement of environmental and workers rights. Environmental groups were concerned that pollution and food safety controls would be more difficult to enforce and could be challenged and eliminated on the ground that they were trade barriers. In response, two supplementary agreements were added to the former treaty; one addresses environmental issues and the other labor issues.

NAFTA was intended to lower barriers to trade in Mexico, United States, and Canada. The projected effect of the agreement was and is that the three countries involved benefit from the increased exchange of goods. New markets for goods were anticipated to result in augmented industry as well as enhanced access to cheaper goods and services. While the net economic impact of NAFTA to the three countries may be positive, models of international trade envisage that certain segments of the economy in each country benefit from the agreement while others lose.

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