What Is NAFTA: North American Free Trade Agreement between USA, Canada and Mexico entering into force on January 1,1994 by which Tariffs were eliminated progressively and all duties and quantitative restrictions were solved by mutual benefit.
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For Details On NAFTA, please read:
https://www.nafta-sec-alena.org/Home/Texts-of-the-Agreement/North-American-Free-Trade-Agreement
NAFTA is the world's largest free trade of 450 million people. It's an economic power house of $20.08 trillion as measured by Gross Domestic product.
NAFTA links the economies of the United states $18.5 trillion, Canada $1.67 trillion and Mexico $2.3 trillion.
Because of NAFTA USA’s exports of goods increase from $142 billion to $517 billion.
Canada and Mexico are top two exports market of USA in 2015.
Because of NAFTA USA'S imports from CANADA($295.2 billion) and from Mexico ($236 billion) increase from $151 billion in 1993 to $590 billion .
USA is mostly imports Oil from Canada and Mexico.
This will reduce gas prices drastically.
After NAFTA USA Oil dependability on gulf countries and Venezuela reduced.
NAFTA boosted all of these three countries trade by eliminating all Tariffs between the three countries.
It also created agreement on international rights for business investors.
That reduced the cost of commerce.
It also increased investment and growth.
Disadvantages Of NAFTA:
US People were Loosing there Jobs because labor is very cheaper in Mexico. Many manufacturing industries withdraw part their production from the high cost United States.
- US Wages were Reduced:
US workers get paid lower wages in USA because of sufficient cheap labour through out the NAFTA union. - Mexico's Farmers Destroyed: Because of the 2002 Farm Bill giving huge Subsidy to US Farmers. US Farmers exports cheap corps to Mexico and Mexico lost 1.3 million farm jobs.
Mexico's Environment Polluted:
Due to huge competition with USA, Mexico's firmer used more fertilizer and other chemicals which results $36 billion per year in pollution.
Mexico's increase deforestation at a rate of 6330000 hectares per year.
Presents Situation:
On January 23,2017 President Donald Trump siigned an executive order to renegotiate NAFTA.
He wants Mexico cut its value added tax and end the Maquiladpra Program.
Trump wants bilateral trade agreement becomes a multilateral ones.
Donald Trump wants try to pull NAFTA in favour of USA citizens.
He also wants that NAFTA should changed according to modern situation.
Presents Scenario:
At present there is threat that USA may be preparing to withdraw from NAFTA. But according to accord, the USA, Canada, Mexico can withdraw after giving six month notice.
NAFTA’s Effect On Economy At Present:
Canada's Dollar and Mexico's Peso dropped and Mexican stock retreated.
But even if President Donald Trump serves notice of a pull out, the trade deal could survive according to USA Economic and political scenario.
Nobody knows what would happen. Great debate going on among trade lawyer's in USA.
It is not easy for USA to pull out because USA’s export to Mexico and Canada dropped down . USA economy will greatly affected by this.
China take over North American market specially in Mexican Market.
US manufacturing industries growth reduced drustically.
Oil and Gas prices in USA greatly affected by this..
Tariffs would rise on goods traded in the region. Because of that commodity prices will increased and company's profitability lower.
An increase in duties hurt the growth of all three countries. It will cut jobs and increased the inflation rate of all three countries.
Mexican Economy will destroyed after USA'S pull out.
There is chance that US Congress could prevent the White House from dismantling NAFTA as the Congress has the power to regulate commerce with foreign nations.
Secondly Pro NAFTA group could challenge Trump's decesion in the court as it's favour for national interest.
Republican law makers who support NAFTA could also team up with trade supportive Democrats to block the repeal of the law that formally implements the trade .
Republicans lawmakers who support NAFTA could protect and creates a road block .
Source Of Information:
https://www.thebalance.com/nafta-definition-north-american-free-trade-agreement-3306147
https://www.thebalance.com/advantages-of-nafta-3306271
https://www.bloomberg.com/news/articles/2018-01-11/nafta-s-dead-long-live-nafta-a-look-at-most-likely-outcomes
https://ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta
Thanks For Reading.