NAFTA: Driving Factors and Linkages to Broader Economic Issues

This paper examines the driving factors that give an account of the patterns to the linkages to the broader economic issues in the United States and the free trade agreements. The paper will also touch on the causes of the negotiations that resulted in the FTA and NAFTA.

Running Head: FREE TRADE AREA
NAFTA
Name
Professor
Institution
Course
Date

FREE TRADE AREA 2
Introduction
The adjustment of the purchasing power parity enables us to be conversant with both the
external and internal purchasing power which is generally known to be the quantity that an
average an income can buy on average inside a country when measured concerning a similar
value in the United States of America. The adjustments in the PPP are important since they tell
us the level of living standards in a given country and also provide a comparison of the living
standards with the other states. The exchange rate. The exchange rates then become useful in
telling about the ability of people to purchase goods and services in the modern global economy.
The United States and Canada have the largest ever bilateral trade in the world.
Thesis statement
NAFTA and TTP have seen the development of free trade among many nations and it
should therefore be developed.
Purpose
The purpose of this paper is to examine the driving factors that give an account of the
patterns to the linkages to the broader economic issues in the United States and the free trade
agreements. The paper will also touch on the causes of the negotiations that resulted in the FTA
and NAFTA.
The decision that meant to pursue a free trade agreement with Canada was the central
problem that troubled the GATT. The United States started seeking ways to have trade
agreements with Canada which was its most significant partner with the aim of increasing the
leverage on GATT with Europeans. The Canadian government also started thinking that
multilateralism was the only way of growing their commitment to the protectionist measures in

FREE TRADE AREA 3
the US in the years of 1970s. The Canadian economists also sought to secure a better position in
the US market thus the negotiation on the free trade was a priority to them. The United States to
expand the agenda of the GATT through the conclusion of GATT plus. The latter included issues
like services and ag4rocultural trade among others.
In the year 1983, the discussion concerning the bilateral accords showed little progress.
The Canadians later decided to seek broader bilateral agreements. The US was receptive to the
matter, and this led to the immediate commencement of negotiations that were finalized in the
year 1987.and took effect on January 1989. The most crucial aspect reached was the inclusion of
the financial services and the broad access to the general realm of the economy (Vinod , 2013)
although the negotiations were not easy, the Canadian government was able to secure an
exception for the cultural industries. However, in most areas, there was no controversy that
agriculture and some other several sectors were supposed to be linked to manufacturing g trade.
Canada, however, had the desire to create a binational panel with the US and its zeal to
hold out and let the negotiations fail and hence revealed that this was a tactical linkage that was
later utilized by the US but with some critical modifications despite the power equations that was
said to be asymmetrical (Gutu, 2016).
In the year 1993, the United States followed up an accord with Canada holding on the
NAFTA agreement. A decision that was made to commence negotiations with Mexico happened
in the year 1990. Talks were included to involve Canada in the year 1991, and the broader
context of Uruguay stalled round treaties proved to be crucial motivation to the US to agree to
the request laid by Mexico for FTA (Gutu, 2016). The negotiations were met by substantive
linkages and also pressures in the US. The large asymmetry in power was crucial in the United
States since they helped the country in reopening the negotiations.

FREE TRADE AREA 4
The negotiations concerning NAFTA fostered a big coalition of several groups in
America including the American environmental and labor groups which pushed for linkages.
Other groups went for the inclusion of the broader issues of human rights. The implementation of
the general system of preferences gave room for significant linkage efforts in NAFTA. The bids
were then followed by the human rights activists and also the religious leaders. The latter was
meant to reframe the efforts of protectionists in trade (Gutu, 2016).
In the context of 1992 elections in the US, the NAFTA labor groups became very
pronounced Ross Peror argued that NAFTA would create problems since many jobs would be
lost to Mexicans. The linkages bore fruits since later the labor rights clause was introduced.
There was full participation by the labor groups in NAFTA, and the groups pushed President
Bush to address the concerns on the environment. The president set up and advisory committee
and this was viewed as a move to have NAFTA passed. The position taken by Bill Clinton on
NAFTA gave him permission to curry the support of the big businesses and also the endorsement
of labor groups who thought that the accords were mere window dressing. The side agreements
that were signed by Clinton did not give assurance to the labor groups and the environmental
activists. The Mexicans, according to the activists saw this as tactical linkages. With the support
of the Republicans still, President Clinton made success in securing congressional passage of
NAFTA in the year 2003 following the accord that took place in January 1994 (Vinod , 2013)
The Impacts of NAFTA Today
NAFTA has enabled the US and Canada have the most prominent trade relationship
globally. The latter has been as a result of a shared common border and also a shared culture.
The three stages which include Auto Pact, CUSTA have also been a catalyst in the creation of
this environment for trade. Auto Pact removed the barriers to trade forced by the US. After the

FREE TRADE AREA 5
ratification of the CUSTA in 1988, there was increased growth in Canada’s exports to the United
States (Gutu, 2016).
NAFTA was mainly created to promote free trade between the US, Canada, and Mexico.
The latter led to the elimination of most tariffs and barriers.
Similarities
Both purpose of promoting free trade through the elimination or the reduction of tariffs.
They also include the provisions that are aimed at disputing the sanitary measures and
investments. The two agreements have great geopolitical effects, and they promote multinational
corporations instead of improving the wage equality. The two contracts include the provisions
that concern the protection of the environment and also the protection of the labor rights (Vinod ,
2013).
NAFTA aims at the creation and promotion of regional trade and also lead to the
elimination of the existing barriers that hinder imports and exports. TPP involves a more
significant number of countries while NAFTA involves just three states. The aims of TPP
involves strengthening the relationship between US AND SOME Asian economies (Gutu, 2016).
Conclusion
NAFTA and TPP comprise the two most considerable agreement incentives in the free
trade, and they advocate for the free trade in the member countries by removing the trade
barriers. NAFTA was created in the year 1994 and was implemented by Canada Mexico and the
United States of America. Since the 1970s, the Democrats have become protectionists as far as

FREE TRADE AREA 6
labor base is concerned. The latter has led to the support of free trade agreement in the early
1990s which have prospered in different regions in the world.
Recommendations
The United States should strive to keep parts of NAFTA that work. The president should
also strife to modernize NAFTA to take advantage of the new technologies and also expand
NAFTA. There should be talks to eliminate labor regulations that are not favorable to the traders.

FREE TRADE AREA 7
References
Gutu, I. (2016). The TPP and TTIP Trade Agreements: Central and Europena onl;ine library. The
international negotiation process, 8(1), 81.
Vinod , K. A. (2013). U.S. Free Trade Agreements and Linkages. International Negotiation, 18(1), 89.