What is the NAFTA Agreement: The International Agreement
You probably have heard about NAFTA and its agreement, but you are wondering what is the NAFTA Agreement, anyway? And why is it so important? This is one of the collaborative works between countries that are expected to bring significant impact in economy.
About the Agreement
NAFTA is short for North American Free Trade Agreement and it is a collaborative work (a treaty, if you may say) between the United States, Canada, and Mexico. As the name suggests, the agreement is designed and set to remove the trade barriers between these nations. The three countries are hoping that once they eliminate the tariffs, then the investment opportunities can increase.
Because of this condition, NAFTA has been considered as the biggest free trade agreement in the world. The gross domestic products of themselves (the 3 countries) are worth $20 trillion. With a better and clearer idea of what is the NAFTA Agreement, the agreement itself has 2,000 pages consisting of 22 chapters and 8 sections. Through NAFTA, it is also the first time that two of the world’s developed countries make a collaborative work with an emerging market country.
Pros and Cons
Just like other types of agreement, NAFTA has its own perks and downsides. Not everything about the deal is considered advantageous. And yet, not everything about it is considered disadvantageous or risky.
The benefits of NAFTA are:
- The grocery prices in America will be higher without the (tariff-free) imports from Mexico
- NAFTA has increased the economic and trade growth in these three countries
- The imported oil from Mexico and Canada has prevented the higher gas price
However, just as mentioned before, the agreement does have its own disadvantages, such as:
- It sends many of the American manufacturing jobs to Mexico which is lower in cost
- Workers who are keeping their jobs in the industries have to accept the facts that they get lower wages
- Workers in Mexico also suffer in terms that they experience exploitation within its own programs
The Major Functions
NAFTA does have its own function in the trade:
- It eliminates import and also export tariffs between those 3 countries. With NAFTA, clothing, automobiles, farm products, finance, and telecommunications enjoy the benefits
- It grants all co-signers the most favored nation status. One of the major focuses is to provide equal treatment to all parties – so domestic investors won’t get better treatment than the foreign ones.
In case you want to see what the agreement looks like, no need to worry. We have the example so you won’t have to wonder about what is the NAFTA Agreement anymore.