North American Free Trade Agreement (NAFTA)
North American Free Trade Agreement (NAFTA) is an agreement between three countries: Canada, Mexico, and United States. The agreement was as a result of diplomatic dialogs between the three countries back in the year 1990. The agreement came into operation in 1994, creating one of the world’s leading free trade area zones and setting the basis for substantial commercial growth and increasing prosperity in the three countries. Each country ratified the agreement including the United States. NAFTA agreement faced divergent views from organizations such as labor, environmental and consumer groups. The differing views were because NAFTA was a radical experiment and before, there has never been such a merger of three countries with such fundamentally different levels of development. Further, until NAFTA, trade agreements only dealt with the cutting tariffs and lifting quotas to set the terms of trade in merchandises between nations.
The labor movement is against the agreement believing that free trade with Mexico will harm their interest, they believed NAFTA to be harmful to the United States economy as whole. Labor alleges that NAFTA will reduce personnel safety and wages in both United States and Mexico and subsequently cause loss of United States jobs. Labor attempts to disrepute the NAFTA, overstate the potential arms of the agreement while denying many of its advantages. The minimization of the business hurdles across the world brings about massive increase in trade and commercial activities among the participating nations.
In creating this global trading system at the Bretton Woods Conference, Democrats and Republicans believed that free trade would be advantageous to most working Americans. The NAFTA opponent-labor is wrong, the NAFTA will benefit the whole United State economy. It will reduce the costs for end users on basic products such as clothing, food, and automobiles. Since these goods require extraordinary labor content in their manufacture, reducing labor costs will reduce the wholesale prices of these products. Reducing the costs of end user products not only discourages inflation, but also improves the standards of living of all the US citizens and makes trade more competitive.
The NAFTA also will increase United States exports to Mexico, which will significantly benefit the US economy. Mexico at present is America's third biggest trading partner, after Japan and Canada, which is developing fast. United States exports to Mexico are considerably weighted toward the high-value, high-technological goods that are the base of future American growth (Hanson and Gordon 2013). Advance in exports has been one of the key factors in American economic development over the past years and a foundation of much of the earlier and forthcoming job creation. The American Department of Commerce approximates 19,100 U.S. employments are created for every $1.0 billion rise in American products exports. The NAFTA will lower Mexico's trade barriers even more, guaranteeing that American exports to that country will continue to increase (Hanson and Gordon 2013). Despite the clear link between the free trade and overall economic success, there will always be organizations that believe their interests to be endangered by the rivalry abroad.
EU guidelines and directives, both present and prospective have a critical impact on American trade and consumers. As the biggest market and key trading partner for the US, the EU is increasingly setting standards that American companies must meet to remain competitive in the world market. Given the tendency of the European Union to accredit a higher priority to safeguard of the environment, user’s health, safety and privacy as well as reduction of free-trade misrepresentations, resulting from monopolies and biased business practices, a number of consumers may welcome the increased effect of European Union rules (Knill, Christoph, and Lehmkuhl 2012). However, the effects on trades, and particularly large companies in the US are negative. The adverse effects are to the extent that EU currently creates an additional regulatory barrier. The barrier is to the extent that neither American citizens nor American trades have any direct control or influence. The following are the four general areas significant in terms of their direct effect on the ability of the American firms to conduct trade and sell their goods in the European market;
2.1 Environment Safeguard
There is a wide selection of EU commands that control and impose high standards of environmental protection. The recent one is the End of Life Vehicles that has significant influence on the American automobile industry. The new regulation is anticipated to raise the cost of new car manufacture particularly in terms of minimizing toxic substances that cannot be recycled.
2.2 Consumer Health and Safety
Consumer health can be manifested in the ongoing scuffles over the use of GMOs in food manufacture. GMO is a directive heavily regulated within the EU by EFSA. The limits placed on the US agriculture have been vital, as several American producers find the largest foreign market in the world closed to their goods. Producers of packaged food are facing costly requirement to trace and label all components that are genetically modified organisms. The precondition of complying with CE mark safety requirements prior to receiving access to European Union markets forces Americans firms to assume a substantial cost only to be able to sell their goods within EU.
2.3 Consumer Privacy and Access
Over years, EU has required a greater level of safeguard for personal data transferred over the internet. This prerequisite holds for firms that function both within and outside the European Union. This restriction severely limits all companies, including American ones from freely transmitting personal data between their European offices and those located elsewhere. American regulations guarding personal information are far less restraining than those approved and presently in operation in the European Union.
2.4 Market Access and Competition
The EU is a devoted protector of the free market through its competition rules that strictly restrain monopolistic tendencies within the European Union market. Specifically, mergers between firms are controlled to protect just access to the market. Large business in America wishing to implement merges must currently face an additional obstacle.
The influence of the EU on American commerce and trade practices is substantial, but generally remains unidentified to those outside most directly affected in the business industry.