Efficiency of the North American Free Trade Zone

Abstract

The creation, evolution and features of implementing the North American Free Trade Area are considered. The precondition of creating and subsequently operating the North American free trade zone became «Plan Abbott», the main purpose of which was to stimulate American investment in leading Canadian industries. Having signed an agreement on liberalization of trade, the automotive industries of the US and Canada negotiated and signed the US-Canada Free Trade Agreement. The main provisions of the North American Free Trade Agreement, which concerned primarily the removal of all tariff and non-tariff barriers on produced and sold commodities in North America for fifteen years after the agreement came into force are characterized. Other main objectives of the FTA in North America are as follows: an increase in employment rates and improvements in working conditions and living standards; intellectual property rights; management of trade relations and disputes; performance of labour, environmental laws and regulations; cooperation in terms of regional and multilateral trade forums. The performance of economic reforms in Mexico towards liberalization of protectionist trade and investment policies aimed at attracting foreign direct investment and economic growth stimulation are estimated. Measures in the field of removal the tariff and non-tariff instruments made by Mexico after it became a member of the General Agreement on Tariffs and Trade (GATT) are analyzed. The implemented measures of liberalization trade allowed Mexico to transform from one the most protectionist economies in the world to one of the most open. The different opinions on the NAFTA creation and its impact on the economic development of member countries are considered. The supporters argued that the agreement would help to create thousands of jobs, reduce income inequality within region, and support the further deepening of economic relationships of the USA and Canada with Mexico. At the same time, opponents believe that a free trade zone in North America will lead to huge job losses and wage reductions in the USA. The effects of NAFTA on production, employment, trade and investment environment of the USA with member countries of the integration union are investigated.