The North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) is a trilateral deal between Canada, Mexico and the United States that came into force in 1994. The entry of Mexico into the traditional agreement between the US and Canada was based on the country’s need for growth and economic stability. In fact, part of the reason for Mexico’s entry was to bolster development through the provision of middle class jobs. Ideally, Mexico envisaged an agreement that would lift millions of people from the lower classes thus growing the economy. In the push for the entry of Mexico, key improvements in employment, wages and migration were anticipated. In addition to the benefit of economic growth, Mexico joined the agreement to change its protectionist economy into a democratic one. In this regard, the country hoped to benefit from increased investment from external investors largely drawn from the US and Canada.

Although the benefits of the agreement have been relatively lower than those promised during the ratification, Mexico has gained a lot from the agreement. For instance, the country’s economic growth has maintained a rate of approximately 2% following the signing of the agreement. In addition, the trade in the country has undergone rapid increase with exports increasing four-fold as a percentage of the GDP. Consequently, increases in trade have led to a decline in the country’s trade deficits with the US being the largest importer of Mexico exports. The agreement has further benefited the country through increased foreign investment in areas of manufacturing. Following the signing of the agreement, there has been increased migration of Mexicans into the US. Also, the signing of the agreement has resulted in increased knowledge and exchange of skills from more advanced companies. Overall, the agreement has been of significant benefit to Mexico through increased trade and economic growth.

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