Question

Based on the experience of Europe, do you believe each member of NAFTA is ready to join a monetary union of North America? Explain your answer fully with the support of your research.

Answer 1

No, each member of NAFTA may not be ready to join a monetary union of North America

The main logic which was given for the EURO’s use as a single currency in Europe was one market, one money. But there is a lot of differences between European Union and NAFTA which are stated as below:-

1. If we look closely, EU can be treated as a single market in terms of different products and services and factors of production. But in case of NAFTA, there are still a number of trade barriers both between and within the member countries.
2. The concept of one market one money can never be implemented in NAFTA due to the least possibility of a single market in different types of labor
3. The economic integration of European Union was a very long process. It initiated in 1950 and EU was resulted due to the development of European Monetary System. Thus a rapid change in the countries of NAFTA in terms of single currency and a monetary union cannot be considered
4. If we look from the perspective of European Unions, the absence of coordination among the countries of NAFTA is the biggest hurdle as there is no institutional structure in NAFTA.

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