The North American Free Trade Agreement

By: Sarah

The North American Free Trade Agreement (NAFTA) has been the subject of much debate since its historical signing in 1992. This landmark free trade agreement, signed by Canada, the United States, and Mexico is both praised and criticized for the effects it has had on these countries.

NAFTA is a prime example of how the free-market structure benefits economies. The free trade agreement allows for maximum efficiency in production of the things we purchase. Each country will have certain goods that it can produce using fewer resources than its neighbor can. For example, because of its climate, Canada can grow wheat using fewer resources, such as electricity and fertilizer, than Mexico can, and Mexico can produce coffee using fewer resources than Canada. This means that Canada has a comparative advantage in the production of wheat, and Mexico has a comparative advantage in the production of coffee. If each country focuses on the goods in which it has a comparative advantage, and trades for other goods, the economy is operating at maximum efficiency and very few resources are being wasted. The advantage of NAFTA is that it allows this trade of goods to occur with few, if any, restrictions.

Another main advantage of NAFTA is that it sets a precedent for cooperation between countries. Although 9/11 brought national security back to the top of every country’s mind, the groundwork laid by NAFTA to not close borders to one another, is still very much alive. The signing of a free trade agreement is evidence that these countries are cultivating a more open and productive relationship with each other. Free trade agreements create international cooperation and mutual exchange. In the face of international issues such as the economic crisis, terrorism, and global warming, all of which are very real and very threatening, international cooperation is more important than ever before to promote a productive and secure political climate.

NAFTA has had many positive effects on Canada. To learn more about Canada and its role in NAFTA check out Canada’s NAFTA website.