Economic Relationship among NAFTA Nations

The North American Free Trade Agreement, popularly known as NAFTA, is an ideal display of how the outward-looking nations, which resort to trade liberalization policies, experience the benefits of trade in the form of greater competitiveness and increased wealth. Trade benefits the manufacturers, laborers, and farmers through simplification of discriminatory and restrictive trade practices. The consumers on the other hand, get the benefits of trade in the form of lower commodity prices.

Since its formation on 1st January, 1994, the North American Free Trade Agreement has played a pivotal role in deepening the economic relationship among Mexico, Canada, and the US. The NAFTA attempted to promote multilateral trade agreements among the member nations. It represents the biggest trade block of the world measured in terms of collective purchasing power parity GDP of the member nations.

NAFTA Trade Policies

The North American Free Trade Agreement has taken a number of policy measures to strengthen the rules of trade followed by the North American nations. The flexibility in the economic infrastructure initiated by the NAFTA has resulted in substantial increase in investment and trading activities across the NAFTA nations.

Canada has recorded an increase in export by 87% to the other members of NAFTA. Exports from Mexico to US registered a substantial increase by 234%. American exports to Mexico and China have also shown considerable growth since the formation of the NAFTA.

The new trade rules initiated by the North American Free Trade Agreement has helped Mexico and Canada to boost up their respective shares of exports to US. The NAFTA has also has also been able to generate a number of new sources trading and investment options among the member nations of North America.

The NAFTA has taken the necessary initiative to increase competitiveness in the international market. With its effective trade rules and other policy measures, NAFTA has emerged as one of the most dynamic trade blocs in the world. The NAFTA nations contribute around 25% of the global imports and 19% of the total exports of the world. The Agreement has brought about an environment of financial stability necessary to facilitate free flow of goods and services and investments across the NAFTA nations. Aided by its stable economic environment, North America has been able to draw huge amount of FDI. North America shares 23.9% of the international inward foreign direct investment. As far as the global outward foreign direct investment is concerned, the contribution of North America happens to be around 25%.

With their favorable economic infrastructure and trade policies, the economic relationship among the NAFTA nations is bound to be stronger in the years to come.