In January 1994, the United States, Mexico, and Canada implemented the North American Free Trade Agreement (NAFTA).The goal of NAFTA is to create better trading conditions through tariff reduction, removal of investment barriers, and improvement of intellectual property protection.NAFTA continues to gradually reduce tariffs on set dates and aims to eliminate all tariffs by the year 2004.
Before NAFTA was established, investing in Mexico was a difficult process.Investors needed the Mexican Government’s approval and were also required to meet specific investment guidelines.These requirements necessitated investors to export a set level of goods and services, utilize domestic goods and services, and transfer technology to competitors.Under NAFTA, investors no longer need government approval to invest and are treated as domestic investors.NAFTA has also increased intellectual property rights and allowed companies to obtain patents in Mexico and Canada.In the past, companies were hesitant to export research and development intensive goods; with increased intellectual property protection, however, exports of these goods has shown a definite increase.
As a result of better trading conditions, exports and imports of most other goods have increased along with the research and development intensive goods.In Mexico, the elimination of investment barriers has allowed investment to expand. Increased trading and investment has then created many jobs, raised the Gross Domestic Product, and lowered consumer prices.The macroeconomic principles defined in Economics 103 relate to NAFTA’s impact on aggregate supply and demand, employment, investment, and their effects on national income.
The free trade established by MERCOSUR also involves countries within South America.MERCOSUR, the Southern Common Market ( Mercado Common del Sur) was established in 1991 after a series of other free trade treaties fa…