The North American Free Trade Agreement (NAFTA) is a trade agreement between the states of Canada, Mexico, and the United States. The document was signed in 1992 by the President of the United States George Bush, the President of Mexico, Salinas and the Prime Minister of Canada Mulroney. The United States didn’t sign NAFTA into law until 1993, when Bill Clinton signed the treaty into law. The treaty passed the US House of Representatives by a 234 to 200 and the US Senate by a margin of 60 to 38. In essence NAFTA eliminated restrictions on the flow of goods, services, and investment in North America. NAFTA eliminated Mexican tariffs of 250% compared to US tariffs. NAFTA originally eliminated around half of the tariffs between the two countries.
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Free trade is mutually beneficial because it allows for every state to use their comparative advantage to produce the goods that they can to maximum efficiency and then trade them with other countries who are also producing to the maximum efficiency their goods. This allows for the economy to reach its market equilibrium in which supply equals demand. Free trade also helps the market reach the optimal equilibrium because tariffs are taxes on products imported from other countries. When a tax is placed on a product it is felt by both the producer and the consumer. A tax also forces the consumer to pay a higher price then they would have without the tax and the producer to sell less of a product then they would have without a tax on the product. Taxes also create deadweight loss where there is more demand than what is being produced. This means that without the presence of a tax that the market would supply what was being demanded rather than producing an amount below that because of the increasing marginal cost due to the tax. All in all free trade is good for the economy because it increases trade which is always mutually beneficial to both sides of the exchange. In addition to trade being mutually beneficial to both sides of the exchange increasing worldwide trade would help to decrease the opportunity for armed conflict to arise, as evident in Europe. When Germany and France have an issue they negotiate and solve the issue, because they are economically tied to one another. If they were to engage in an armed conflict or war, they would destroy their own economies. Tying together the economies of the world would hopefully decrease the amount of armed conflict between states by creating a new balance of the world in which the
Free trade is mutually beneficial because it allows for every state to use their comparative advantage to produce the goods that they can to maximum efficiency and then trade them with other countries who are also producing to the maximum efficiency their goods. This allows for the economy to reach its market equilibrium in which supply equals demand. Free trade also helps the market reach the optimal equilibrium because tariffs are taxes on products imported from other countries. When a tax is placed on a product it is felt by both the producer and the consumer. A tax also forces the consumer to pay a higher price then they would have without the tax and the producer to sell less of a product then they would have without a tax on the product. Taxes also create deadweight loss where there is more demand than what is being produced. This means that without the presence of a tax that the market would supply what was being demanded rather than producing an amount below that because of the increasing marginal cost due to the tax. All in all free trade is good for the economy because it increases trade which is always mutually beneficial to both sides of the exchange. In addition to trade being mutually beneficial to both sides of the exchange increasing worldwide trade would help to decrease the opportunity for armed conflict to arise, as evident in Europe. When Germany and France have an issue they negotiate and solve the issue, because they are economically tied to one another. If they were to engage in an armed conflict or war, they would destroy their own economies. Tying together the economies of the world would hopefully decrease the amount of armed conflict between states by creating a new balance of the world in which the