Trade Aggreement

North American Free Trade Area (NAFTA)

Establishment: January 1, 1994

Member Countries: 3 (Canada, Mexico, United States)

The North American Free Trade Area is the trade bloc created by the North American free Trade Agreement (NAFTA) and its two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC) whose members are Canada, Mexico and the United States. It came into effect on 1 January 1994. It is the world’s largest free trade area.

NAFTA has two supplements:

• The North American Agreement on Environmental Cooperation (NAAEC) and
• The North American Agreement on Labor Cooperation (NAALC).

Commission for Labor Cooperation

• Created to promote cooperation on labor matters among NAFTA members and the effective enforcement of domestic labor law.

• Consists of a Council of Ministers (comprising the labor ministers from each country) and a Secretariat, which provides administrative, technical, and operational support to the Council and implements an annual work program. Departments responsible for labor in each of the three countries serve as domestic implementation points. 

 Commission for Environmental Cooperation

• Established to further cooperation among NAFTA partners in implementing the environmental side accord to NAFTA and to address environmental issues of continental concern, with particular attention to the environmental challenges and opportunities presented by continent-wide free trade.

• Consists of a Council (comprising the environment ministers from each country), a Joint Public Advisory Committee (a 15-member, independent volunteer body that provides advice and public input to Council on any matter within the scope of the environmental accord), and a Secretariat (which provides administrative, technical, and operational support).

Exercises

1. What does NAFTA stand for?   Or NAFTA stands for   DBBL (MTO): 2009

A.    North African Free Trade Act

B.      North American Transportation Association

C.     New Arkansas Free Transam Act

D.    North American Free Trade Agreement

Answer: D

Note: NAFTA stands for North American Free Trade Agreement. NAFTA was very much misunderstood for quite a while, after it was implemented. This was the first "North American accord", Reagan said.

2. Who signed NAFTA when it was first implemented (subject to approval by the legislatures of the countries concerned)?

A.    Mulroney, Gortari, George H. W. Bush

B.      Mulroney, Kennedy, Gortari

C.     Mulroney, Gortari, Nixon

D.    Carter, Gortari, Mulroney

Answer: A

Note: Mexico, United States, and Canada benefited greatly from this North American free trade agreement. Prime Minister Brian Mulroney signed the agreement for Canada, President George H. W. Bush for the United States, and President Carlos Salinas de Gortari signed for Mexico.

3. Which American president actually signed the NAFTA following approval by Congress?

A.    Jimmy Carter

B.      George W. Bush

C.     Bill Clinton

D.    George H. Bush

Answer: C

Note: At the very beginning, George H. Bush did the negotiating for the NAFTA, but Bill Clinton was the president who actually signed the agreement itself.

4. What presidential candidate opposed NAFTA?

A.    Al Gore

B.      Bill Clinton

C.     Richard Nixon

D.    Ross Perot

Answer: D

Note: Ross Perot, at the time, was running for president. He was so opposed that he wrote a book called "Save Our Jobs, Save Our Country". Ross wasn't the only one against NAFTA though. Many labor unions were against NAFTA.

5. When did United States, Mexico, and Canada sign the NAFTA?

A.    December 17, 1992

B.      July, 30 1992

C.     January 20, 1993

D.    November 25, 1992

Answer: A       

Note: Canada, Mexico, and the United States signed the North American Free Trade Agreement December 17, 1992. On December 17, Prime Minister Brian Mulroney of Canada, President Carlos Salinas de Gortari of Mexico, and the President of the United States George H. Bush signed the North American Free Trade Agreement.

6. The regional trade agreement between the USA, Canada and Mexico is known as-

A.    Mercosur

B.      NAFTA

C.     ASEAN

D.    the EU

Answer: B

7. The North American Free Trade Agreement came into effect on 1 January-

A.    2004

B.      1994

C.     1984

D.    1974

Answer: B

Mercosur

Headquarter: Montevideo, Uruguay.

Official languages: Portuguese, Spanish, Guarani

Membership: 4 members (Venezuela is a full member but has been suspended since December 1, 2016).

Mercosur or Mercosul is a Regional Trade Agreement (RTA) between Brazil, Argentina, Uruguay, Venezuela and Paraguay, founded in 1991 by the Treaty of Asuncion, which was later amended and updated by the 1994 Treaty of Ouro Preto. It is known as the Common Market of the South. Its purpose is to promote free trade and the fluid movement of goods, peoples, and currency. Venezuela is a full member but has been suspended since December 1, 2016. Associate countries are Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname. Observer countries are New Zealand and Mexico.

Economic Growth and Development

Economic growth

Economic growth is a positive change in the output, or production, of a country or an economy. It is the increase in the market value of all goods and services produced by an economy over time and is a long-term expansion of a country’s productive potential.

Economic growth increases in real GDP. It measures to a numerical value. Therefore, economic growth can be calculated as a percentage increase in the Gross Domestic Product (GDP) of a given economy. This is done by finding out the previous year’s GDP and finding the ratio between the current and the previous GDP.

Causes of Economic Growth

Economic growth means an increase in Real GDP. Economic growth means there is an increase in national output and national income. Economic growth is caused by two main factors:

1. an increase in aggregate demand (Aggregate hours)

                                                                                i.            Working-age population growth

                                                                              ii.            Changes in the employment to population ratio

                                                                            iii.            Changes in average hours per worker

2. an increase in aggregate supply (productive capacity of labor)

                                                                                i.            Physical capital growth

                                                                              ii.            Human capital growth

                                                                            iii.            Technological advances

There are three different ways of measuring GDP

• The income approach
• The output approach
• The expenditure approach

Four Factors of Economic Growth: These four factors of growth are —

1.   Human Resources: Labor Supply, Education, Skill, Discipline, Motivation.
2. Natural Resources: Land, Minerals, Fuels, Environmental Quality.
3. Capital: Factories, Machinery, Roads, Intellectual Property.
4. Technological Change and Innovation: Science, Engineering, Management, Entrepreneurship.

Economic development

Economic development ideally refers to the sustained, concerted actions of communities and policymakers that improve the standard of living and economic health of a specific locality. Economic development involves development of human capital, increasing the literacy ratio, improve important infrastructure, improvement of health and safety and others areas that aims at increasing the general welfare of the citizens. The terms economic development and economic growth are used interchangeably but there is a very big difference between the two. Economic growth can be viewed as a sub category of economic development. Economic development is a government policy to increase the economic, social welfare and ensuring a stable political environment. Economic growth on the other hand is the general increase in the country products and services output. It examines both macroeconomic and microeconomic factors relating to the structure of a developing economy and how that economy can create effective domestic and international growth

Economic development leads to improvements in many sectors of a nation. There are a variety of indicators that economist use to measure the level of economic development in a country. The indicators are--

1.      Declining poverty rates,

2.      Increasing literacy rates,

3.      Declining infant morbidity

4.      increasing life expectancy

Difference between Economic Growth and Economic Development

	Economic Development	Economic Growth
Definition	Economic development refers to a process whereby the people of a country or region to utilize the resources available to bring about sustained increase in per-capita production of goods and services.	Economic growth is a long run expansion in an economy’s capacity to produce goods and services. Implies a sustained rightward shifting of a nation’s production possibilities curve and aggregate supply curve.
Formula	Economic Development = Economic Growth + Structural Change.	Economic Growth = Economic Development – Structural Change.
Factors	Declining poverty rates, Increasing literacy rates, Declining infant morbidity and increasing life expectancy	Economic growth can occur from two main factors: 1. The increased use of resources such as land, labor, capital and entrepreneurial resources due to improvements in technology. 2. The increased productivity of existing resources use through increased labor and capital productivity.
Measurement	Economic development is measured in four ways GNP, GNP per capita, Welfare, and Social Indicators. Basic needs such as health, education, food, water supply, sanitation and housing.	Economic growth is measured in real gross domestic product GDP
Changed	Economic development is increased upward to the aggregate socioeconomic development of capitalist institutions and institutions promoted technological development.	Economic growth is a quantitative concept since it involves increased productive capacity in an economy, which leads to rising national output, incomes and living standards over time
Part and Parcel	Economic development is impossible without economic growth.	Economic growth is possible without economic development.
Economic Structure	It has changed to economic and social structure.	It has unchanged to economic and social structure.
Problem	Economic development is problems of underdeveloped or developing countries.	Economic growth is problems of developed countries.
Time	It is long term decision	It is short term decision
Different	Different countries are development different.	But different countries may be growth same.