by Bernadette K

Created on: December 15, 2008

NAFTA ( North America Free Trade Agreement )

NAFTA is a formal organisation of the North American co-operation to have free trade among some countries. Such as the United States, Canada and Mexico. Essentially NAFTA was formed in 1988, because at that time there was already freentrade agreement between the United States and Canada. At the time the agreement between Canada and United State was still bilateral. This agreement was set up in order to improve the condition for the Canadian economy at that moment. The economy of Canada was getting worst because of the increasing of the unemployement in Canada. And some big international investment company was moving their interest to the United States.

Actually the idea of having NAFTA already discussed with Presiden Ronald Reagen. But later on Presiden George Bush was the one signed the agreement with the other leader of two countries, Mexico and Canada.

After they formed this NAFTA, there are few changes in term of trading activities. For example they have the liberation of import tariff for certain commodities among NAFTA's members. They also try to give investor more chance to invest their money on those county by making the prpcedures a little bit easier to attract the investors.

NAFTA eliminated all the non-tariff limits for the trade in the sector of agriculture between America and Mexico.

As mentioned before that NAFTA have agreement for free trade, of course there are few benefits that they got such as

- increase in trade

Since there is free trade, the U.S export grow up especially export to Mexico and Canada. And this increasement also happen the other way around.

- increase in trade of service

With NAFTA agreement, you can see that there are elimination of trade barriers in many kinds of sectors. It also included some important sectors such as health care and financial services.

- increase in foreign direct investment

Many foreign investor interested to do direct investor. NAFTA gaves same legal rights to foreign investors as the local investors. Means that NAFTA help to reduce the risk for foreign investors.

But there are also few negative effect of this NAFTA.One of it is loss of U.S jobs.

Since the labor in Mexico is cheaper than the U.S labor, of course some business would like to use labor from Mexico in order to cut off the high cost. This is the one that caused the loss of U.S. jobs.

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