Question

3. What stage of integration is NAFTA and where do you think it will be by 2025?

4. How is USMCA different from NAFTA?

Answer 1

3) Economic integration refers to the economic cooperation between countries and coordination of the economic policies, leading to increase economic links between them. It occurs because of numerous benefits that may be derived by the cooperating countries. There are different degrees of integration, depending on the type of agreement made between the cooperating countries, and the degree to which varies between them are removed .

Lets discuss the stages of integration briefly  

* Free trade area.

Free trade among the members is permitted.

* Customs union.

Free trade with a common external tariff is allowed.

* common market

Free mobility of factors across the member states takes place.

* monetary Union

Harmonization of monetary policy between the members takes place.

* complete economic integration

Member countries adopt Completely unified economic policy.

North American free trade agreement ( NAFTA) came into force in 1994. Nafta was signed to eliminate all the tariff and non tariff barriers of trade and investment between United States, Canada and Mexico.

* At present, NAFTA is an example of free trade area . Signing of NAFTA has resulted in the elimination of trade barriers between Mexico, America and Canada. Free trade area formation also resulted in an increase in the volume of trade between these countries.

But, even as a free trade area, NAFTA do have some features of a customs union. But it doesn't force all members to have the unified tariff and non tariff barriers policy.

*In September 2018, the US, Canada and Mexico reached an agreement to replace NAFTA . The agreement became a law in 29 January 2020 . But the 1989, free trade Agreement remains only suspended.

Thus, future of NAFTA remains uncertain. The new agreement, dubbed as new NAFTA will still hasn't come into force. It expected to come into effect from July.

2)USMCA ( Unites States Mexico Canada agreement) widely called NAFTA 2.0 is a new trade deal between the three nations. It is an updated version of the nearly 25 year old trillion-dollar worth North American free trade agreement. It is different from NAFTA in the following ways.

* under the USMCA,importance will no longer be required to complete a formal certification document.

* USMCA change the threshold within which low value goods good in that each country duty free.

* Automobiles must have 75% of their continents manufactured in Mexico us or Canada to qualify for zero tariffs ( The requirement was 62.5 Percent in NAFTA.)

* USDairy farmers will have more access to the diary market of Canada. They will be able to Export upto 3.6 percent of Canada's diary market.

* the agreement also create a list of cheese names that Mexico and the United States agree can be marketed without restriction in their countries, and it forces grocery stores in British Columbia to stop their practice of selling British Columbia only wine on certain shelves andstock American wines alongside them.

* USMCA rolls back a special system of arbitration that allowed companies to sue governments for their unfair treatment.

There is another unique difference between USMCA and NAFTA. USMCA has a sunset clause. It is meant to last for 16 years.