NAFTA: Trade and Investment

This essay examines the North American Free Trade Agreement (NAFTA), its purpose of eliminating trade barriers between the US, Canada, and Mexico, and its effects on the economies of the three signatory nations. It explains the concept of a free-trade area and how NAFTA facilitated the reduction or elimination of tariffs on goods and services. The essay uses the example of cheese exports to illustrate how NAFTA impacted pricing and competitiveness. It highlights the significant increase in trade volumes between the three countries due to NAFTA, leading to firms viewing North America as a single market for production and distribution. The essay concludes by noting the complexities of assessing NAFTA's overall impact, as its effects are intertwined with other economic developments.

Introduction
NAFTA was created to eliminate barriers to trade and investment between the US, Canada and
Mexico. The implementation of NAFTA immediately eliminated tariffs on more than one-half of
Mexico's exports to the US and more than one-third of US. exports to Mexico.
Why it is created
The North American Free Trade Agreement (NAFTA) is a piece of regulation implemented
January 1, 1994 simultaneously in Mexico, Canada and the United States that eliminates most
tariffs on trade between these nations.
A ton of civil argument runs about NAFTA's importance – that is, its effect on its three signatory
nations. While the United States, Canada and Mexico have all accomplished financial
development, higher wages and expanded exchange since NAFTA's usage, specialists differ on
how much the understanding really added to these additions, if by any stretch of the imagination.
The outcomes are difficult to detach from other, seemingly more imperative improvements that
have occurred on the landmass and comprehensively in the past quarter century.
What does it mean to have a free trade agreement?
A free-trade area is the region encompassing a trade bloc whose member countries have signed
a free-trade agreement (FTA). Such agreements involve cooperation between at least two
countries to reduce trade barriers – import quotas and tariffs – and to increase trade of goods
and services with each other.
Purpose of NAFTA

The North American Free Trade Agreement(NAFTA) was negotiated among the United
States, Canada and Mexico for the purpose of removing barriers to the exchange of goods and
services among the three countries.
For example
For example, let's assume Company XYZ produces cheese in Scotland and exports it to the U.S.
The cheese costs $100 per pound but is subject to a 20% ad valorem tariff placed on the cheese
by the U.S., which forces Company XYZ to pay the U.S. government an extra $20 to export it.
Company XYZ would presumably mark the price of the cheese up to at least $120 in order to
recover the cost of the tariff.
Under NAFTA, if the exporting and importing takes place within Canada, the United States and
Mexico, the cheese would be subject to a much lower (or even no) tariff, presumably making the
cheese cheaper than a Scottish import.
Exchange volumes between the United States and Canada and Mexico are gigantic and
developing, due in no little part to the way that makers now regard the landmass as one
consistent market for look into, plan, generation, and conveyance. Firms—both substantial
multinationals like Bombardier and Volkswagen extend their supply fastens crosswise over
North America to augment item quality and limit item cost. Thus, the three nations now make
indicatively propelled items in an all around particular trilateral organization.