Free trade is a policy that lifts all trade tariffs and barriers and thus encouraging the free movement of goods (imports and exports) between nations. Agreements to free trade establish free markets where countries can engage in trade in a free and conducive environment. This type of trade is made possible by free trade agreements made between countries. According to the International Trade Administration, these agreements help minimize barriers to exports form the US, protect their interests as well as enhance the rule of law in member countries. NAFTA is one of such agreements.
Free trade comes with its share of pros and cons. It is responsible for increased economic growth, better business environments, encourages investment as well as transfer of technology among countries. NAFTA was very effective in realigning the economic relations in North America by facilitating an integration of the economies of Canada and the US with Mexico’s developing economy. Trade shot up in the three countries as well as investment in those countries which also grew. As a result of this agreement, Canada and Mexico have become the leading destinations for US products as it accounts for up to 3% of the total exports (Council on Foreign Relations, 2016). Many jobs rely on trade activities between Canada and Mexico, which means that this agreement facilitated more employment of people. Farm exports from Mexico also increased since it was implemented and the number of manufacturing industries in the country has also grown substantially, improving productivity in the country (Villareal & Fergusson, 2015). In Canada, Mexican investments have increased, accounting for Canada’s FDI stock (Villareal & Fergusson, 2015).
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...o outsource its manufacturing work in order to cut manufacturing costs. Vertical supply relationships have been created as a result of trade activities between the three countries since the agreement helped manufacturers in the three countries to work together and make goods (Weisbrot et al, 2014). Its manufacturing industries rely on the help of Mexican manufacturers. 75% of goods from Canada and Mexico are returned to the US as imports. The auto industry benefited a lot since components could be produced by one country and the exported to another NAFTA country where it would be assembled and sold to other members. This agreement helped remove tariffs and trade barriers in Mexico which greatly assisted the automotive industry greatly. In addition, since NAFTA came into effect, jobs have increased considerably supported by the US exports business to Canada and Mexico.
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