NAFTA Case Study

715 Words3 Pages
History: In 1988, Canada received 90% of its exports and imports from the U.S. Both countries wanted to have some mechanism to settle disputes and to reduce the cost of these commodities crossing the boarders each day. This lead to the U.S. Canada Free Trade Agreement. At this time FTAs were not a common item held by any two or more countries. This trade agreement was very important to the development of the NAFTA. The elections held in 1988 in both countries were ran on whether or not more free-trade agreements were to be developed. George Bush and Patrick Mulroney both were considered “free-trade candidates” and won their elections. (Caliendo, 2015). Reasons for the NAFTA: Mexico had large tariffs attached to any export that left the…show more content…
NAFTA and CUSFTA have had a substantial effect on international trade quantities, but less effect on prices and welfare in member and nonmember countries. Intra–North American trade increased most rapidly in products where the greatest trade preferences were conferred, even though Canada and the United States appear to be high-cost producers of many of these products. The share of E.U. imports of the same products coming from North America declined. Welfare calculations using the estimated parameters and the paper’s simple static model suggest almost zero welfare impact on member and nonmember countries. Of some concern is the possibility that NAFTA and CUSFTA actually increased North American output and prices in many highly protected sectors by driving out imports from nonmember countries (Romalis, 2007). The on-going study by Lorenzo Caliendo and Fernando Parro, explores the "welfare" effects of NAFTA which is a bit harder to quantify and economic effects. Both free-trade agreements became templates for many other regional and global negotiations, but the NAFTA was very unique in its time. It is also worth noting the potential impact on US trade with Mexico of a dissolution of NAFTA if the renegotiation were to fail and President Trump realized his threat to withdraw from the agreement. Mexico’s most-favored-nation (MFN) tariffs on imports from the United States would then
Open Document