Question

As discussed in the Chapter 1, there are many “Regional Agreements" across the world. Please select one out of these three: 1) North American Free Trade Agreement (NAFTA); 2) European Union (EU); and 3) Association of Southeast Asian Nations (ASEAN). Then, please discuss why this regional agreement was originally created, and its importance, and implications to the United States. What and how can the United States do to better take advantage of the opportuneness, and/or meet those challenges brought by the specific trading bloc.

Answer 1

The North American free trade agreement was created on the 1st January of 1994. The aim of this agreement was to remove most barriers related to trade between the United States, Mexico and Canada.

Implications of NAFTA to United States:

1) This agreement has increased the trade between United States, Mexico and Canada manifolds.

2) Increase in trade has led to increase in the level of output and economic growth in the United States.

3) Eliminating of tariffs and increase in output have led to decrease in the prices of goods of the United States. This increases the welfare of domestic and foreign customers.

4) A number of people in the United States lost their jobs because of manufacturing industries of United States shifting to Mexico as the labour is cheaper there.

The challenges that have been brought by NAFTA to United States are:

1) the loss of employment of a number of workers as the manufacturing industries moved to Mexico because of cheaper labour there.

To meet this challenge, the government of the United States should invest in the economy in various fields to provide employment opportunities to the labour.

2) NAFTA gave Mexico trucks access in the United States even though these trucks do not conform to the safety standards as the United States trucks do.

The United States government should only allow those Mexican trucks in the country which have conformed to the proper safety standards and are no harm to the country in any way.