Trade Blocs in the Global Economy

Trade Blocs in the Global Economy

Introduction

In August of 1992, the converses between the authorities of the United States, Canada and Mexico produced in a North American Free Trade Agreement (NAFTA); the affirmation, which eradicated all tariffs on bilateral trade between the three nations, became regulation on January 1, 1994. Under the NAFTA, all non-tariff obstacles to trade between the United States, Canada and Mexico were eliminated; numerous tariffs were eradicated directly, with other ones being phased out over the time span of 5 to 15 years.

The North American Free Trade Agreement, or NAFTA, formed the largest regional free trade economy agreement between Canada, the United States, and Mexico. NAFTA represented the continuation of a trend established by the 1989 U.S. Canada Free Trade Agreement. The interest in forming the free trade zone was advanced by a perceived need to balance the harmonization that led to the formation of the European Union and by reforms in Mexico that made it more compatible with the economies of the United States and Canada (Bacon, 2008).

Trading Blocs

A trade bloc is an international organization that brings together a group of countries for the purpose of obtaining mutual, benefits in trade and overall economic, notwithstanding that in most cases the formation of blocs of countries is politically motivated.

Impact of NAFTA

The influx of foreign investment in Mexico was facilitated by legal guarantees to the right to repatriate investments and profits, equal treatment to domestic and foreign investors, and indefinite continuity to these guarantees. The improved balance of trade sales was, however, insufficient to change Mexico's position as a net importer because of other factors.

As a result of the foreign direct investment, changes to trade were felt more extensively in Mexico, which experienced dramatic restructuring in its retail distribution systems. The introduction of U.S. and Canadian style supermarkets and hypermarkets, along with lack of preparation by small local retail outlets in the larger urban areas, made it difficult for the smaller outlets to remain profitable.

Agriculture, as part of the trade was also affected by the change in investment levels, along with reformed land ownership rules and the introduction of industrial style of farming. As is the practice in the United States and Canada, capital-intensive agricultural production includes equipment, management style, and technologically enhanced inputs such as fertilizers and genetically modified seeds (Henriques, 2004).

The trade thus changed practices of consumption, in that one part of the region generates demand, which directly affects the production practices and related working conditions, and hence consumption, for the workers and their dependents at the site of production. Those who participate in the production, trade, and consumption system then are included in inherently homogenizing processes.

The effects of NAFTA vary considerably by sector. For instance, it was determined that NAFTA had no apparent effect on the fishery sector in the short and medium term. In the longer term, ability to adapt to changing environmental and consumer demands remains relevant to continuity. The dairy sector too was not susceptible, but, for ...