Assignment 2

4/24/2015

Roll No: 22

Q1. Write the critical evaluation of any of the Regional Economic Integration out of the followings:

NAFTA EU SAARC ASEAN

NAFTA

Negative Aspect: NAFTA did just what a free-trade agreement is primarily aimed at accomplishing: increase trade.  Today, trade between Mexico, the U.S., and Canada has increased by 3.5 times the levels seen in 1994.  In terms of trade liberalization, NAFTA is a success.  Yet, NAFTA still faces criticisms for perpetuating economic and social barriers and inequalities.  Some of the identified underlying economic and social goals of the signing parties to NAFTA are as follows: promote equitable wages, job growth, align environmental standards, and increase investment.

NAFTA has led to net job growth or net job loss.  On one hand, more jobs have been created in Mexico and Canada in the manufacturing sector and more export related jobs have been created in the U.S. On the other hand, manufacturing jobs in the U.S. have been outsourced to countries, such as Mexico, where the wages are lower. In the manufacturing sector, it seems as though NAFTA members must first accomplish the goals of equitable wages before job growth is a possibility.

The NAACE aims to improve member nations’ understanding of the effects trade has on the environment and to align member nations’ environmental policies.  Although the NAACE has set forth an environmental agenda for NAFTA members, measuring its success has been difficult.  The body has not yet determined what data would produce high-quality environmental linkages to trade.  The connections the NAACE has made show that trade liberalization depletes specific natural resources and leads to increased air and water pollution.  The main reason for such impacts is that NAFTA member nations have failed to integrate trade and environmental policies that combat such negative impacts.

Steps to be taken:

NAFTA has done exactly what free trade agreements are supposed to do: increase and liberalize trade.  In order to accomplish the underlying goals, governments need to make broader policy changes. First and foremost, member nations need to align their policies in the areas that effect trade, for example, environmental and worker protection. 

 Third, members need to let go of protectionist measures and let comparative advantage do its work. The U.S. continues to protect markets (namely agriculture) in which it does not have the comparative advantage, disallowing counties (namely Mexico) from holding a larger stake in those markets.