Based on what you have learned about economic unions and the current issues facing the EU,...

Based on what you have learned about economic unions and the current issues facing the EU, do you think that NAFTA could become an economic union in the foreseeable future? Why or why not? Use your understanding of economic and monetary unions as well as your understanding of the cultures of the countries in NAFTA. Review the two arguments against the EU as outlined in the opening case. How do you feel that culture, politics, society, and history would impact any possible economic union for NAFTA?

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Expert Solution

ANSWER:-

The European Union (EU) is an economic union. The countries of the EU coordinate their respective economic policies, laws and regulations so they can work together to address economic and financial issues.

Could NAFTA (North American Free Trade Agreement ) be an economic union in foreseeble future?

In my views there are very less chances of that happening.
Intra-regional-trade-agreement (NAFTA) exports increased significantly from 1990 to 2004 as a result of the U.S-Canada Free Trade Agreement and NAFTA.

Capital moves freely between the United States and Canada and fairly freely with Mexico, but labor does not. Structural similarities are high between the economies of Canada and the United States (even though Canada's economy is much more natural-resource oriented than the U.S. economy), but probably not with Mexico. Therefore, NAFTA does not seem to meet the conditions for an economic union. It is simply an almost free trade area. We could say, that even the Euro Area doen not satisfy the conditions required for a successful optimum currency area (OCA) or an economic union. and yet it did adopt a common currency ?(and ventral Bank) and is coordinating fiscal policies in the expectation that the economies of the member nations will converge and become structurally less unequal over time. Such political will missing in NAFTA.

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Rahul Sunny answered 1 year ago

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