Топики 2 курс / Free trade

Free trade is an international buying and selling of goods, without limits of the amount of goods that one country can sell to another, and without special taxes on the goods bought from a foreign country. As I think it will be more interesting and beneficial for you to get know about meaning of free trade by looking at the largest free trade agreement, which calls NAFTA. It’s an agreement between Mexico, Canada and the United States that eliminates most tariffs on trade between these nations. The NAFTA’s purpose is to encourage economic activity between the three major economic powers of North America.

Positive aspects of NAFTA. Firstly, NAFTA grants the most-favored-nation status to all co-signers. That means countries must give all participants equal treatment. That includes foreign direct investment. They cannot give better treatment to domestic investors than foreign ones. They can't offer a better deal to investors from non-NAFTA countries. Governments must also offer federal contracts to businesses in all three NAFTA countries.

Secondly, NAFTA eliminates tariffs on imports and exports between the three countries.

Thirdly, exporters must get Certificates of Origin to not to pay taxes. For example, a product made in Peru but shipped from Mexico will still pay a duty when it enters the United States or Canada.

Moreover, NAFTA establishes procedures to resolve trade disputes and they protect businesses from unfair practices.

In addition to that, all NAFTA countries must respect patents, trademarks, and copyrights.

And finally, the agreement allows business travelers easy access throughout all three countries.

Negative aspects of NAFTA. Firstly, U.S. Jobs Were Lost. Since labor is cheaper in Mexico, many manufacturing industries withdrew part of their production from the high-cost United States.

Secondly, U.S. salaries became lower. Not all companies in these industries moved to Mexico. Some of the them stayed at USA, but workers started to get lower salary.

After that, Mexico's Farmers were put Out of Business. Thanks to NAFTA, Mexico lost 1.3 million farm jobs. When NAFTA removed trade tariffs, companies exported corn and other grains to Mexico below cost. Rural Mexican farmers could not compete. At the same time, Mexico reduced its subsidies to farmers.

Moreover, Mexico's Environment became worse. In response to NAFTA’s competitive pressure, Mexico started used more fertilizers and other chemicals, costing $36 billion per year in pollution.

Finally, there is a problem of unequal distribution of Canadian cities. Most of largest Canadian cities located in the south of the country near the border with the USA. It means, that south of the country has big population and other large areas of the country are empty.

Conclusion. NAFTA has received a lot of criticism for taking U.S. jobs. While free trade and NAFTA has also done good things for the economy,it has weaknesses. These disadvantages had a negative impact on both American and Mexican workers and even the environment. But on the other hand NAFTA increased the competitiveness of these three countries in the global marketplace. It allows them to be more competitive with China and the European Union. NAFTA is the first time two powerful, developed economies signed a trade agreement with an emerging market country.