Question

How has NAFTA affected trade among the U.S., Canada and Mexico? Is NAFTA good for domestic U.S. and Mexican producers?

Answer 1

NAFTA or North American Free Trade Agreement is an agreement signed by the United States, Mexico and Canada in 1992 as a free trade area. It was not well received by all the parties as it removes lower skilled assembly and manufacturing jobs from the Home and transplants them to Mexico where labour costs are much lower.

Region-wise, the patterns of trade exhibit the same picture. There has been a gradual shift away from the traditional markets towards the regions in Mexico and Canada. The reason for this shift may include the growing economies of the two nations.

The progress made in the World Trade Organization in liberating tariffs and non-tariff barriers in many countries is yet another reason. NAFTA was one of the liberalization agreement that has increased trade. There are both winners and losers from this side. It has been observed that its balance of trade with the country U is mainly in labor-intensive manufactured goods.