Impacts of NAFTA

Impacts of NAFTA

Introduction

In order to boost an economy, many countries attempt to adopt economic policies which results in economic growth. Economic growth can be achieved in many ways, such as, increasing the overall output of an economy, becoming more efficient, improving technology, improving the overall infrastructure and etc. The balance of payment of a country also impacts the economic situation of the country. Negative balance indicates alarming situation for an economy. Usually, a negative balance of payment arises when a country imports more than it exports. In order to improve the position of balance of payments, countries must seek to export more than it imports. This could be achieved through increasing the output of an economy. However, in spite of the fact that a country increases its output, it is unable to export its goods to other countries. This happens due to many reasons, as countries impose tariffs and import quotas on all imports. It is usually done by the importing country, to protect its national industries and protect local job market in the country. There are also many other restrictions imposed by different countries. Some of which prohibits other countries to make investments in their home country and some makes it impossible for citizens of the country to make investments abroad. All these restrictions are called trade restrictions, which attempts to protect national industries and economies. The (CFA Institute, 2010) quotes that, trade restrictions may result in less consumption opportunities by the citizens of a country.

However, these trade restrictions are not always seen as a positive thing by many economists around the world. Some countries, in order to avoid trade restrictions, sign treaties with other countries to encourage trade without any trade restrictions. These economic treaties, attempt to eliminate trade barriers among the member countries. It encourages free trade, and free flowing of funds across the member countries. A treaty signed by neighboring countries, can also be called as a trading bloc. There are many trading blocs which exist in the present world. Some of these trading blocs were made many years ago, and some trading blocs are recently formed. These trading blocs have political, social and as well as economic impact on the member countries. Notably the world's largest trading bloc is the European Union, but in terms of Gross Domestic Product of its members, NAFTA is the world's largest trading bloc which is in force today. NAFTA (North American Free Trading Agreement) agreement was signed among three countries, United States of America, Canada and Mexico on January 1, 1994. This agreement concealed the previous United States and Canada's FTA (Free Trading Agreement) agreement, which existed before NAFTA came in to being. This agreement was aimed to improve and encourage free trade among the member countries. NAFTA also brought an end to many trade restrictions that previously existed between United States of America and Mexico.

Discussion

As previously discussed, these trading blocs impacts it member countries politically, socially and economically. The most major and prominent impact NAFTA had on ...