Lesson
In lessons three and five of this unit, you were introduced to the very important World Trade Organization or WTO. While this is an enormous organization, at 146 member nations as of April 2003, it is not the Abe all, end all@ of trade relationships. In fact, the WTO welcomes smaller regional trade coalitions between countries, known as trading blocs. There are presently three types of trading blocs:
- Free trade areas: for example, NAFTA
- Customs Unions: for example, CARICOM
- Common Markets: for example, the EU
In 1988, the United States and Canada signed a free trade agreement called the Canadian Free Trade Agreement (C-FTA), which had its origins in the Auto Pact, and the Defense Sharing Agreement of the 1960's. The C-FTA was designed to force Canadian businesses to increase their competitiveness and set up a mechanism for dispute settlement that was immune from US domination. In December 1992, Canada, Mexico, and the United States signed the North American Free Trade Agreement (NAFTA), and the pact went into force on January 1st, 1994. NAFTA's objectives are to:
- eliminate barriers to trade in goods and services,
- promote conditions of fair competition among the parties,
- increase investment opportunities within the free trade area,
- provide protection and enforcement of intellectual property rights, and
- establish a framework for further cooperation to enhance the benefits of the agreement. This agreement also has protective components in terms of labour and environmental issues. Generally, the NAFTA holds positive implications for the future of the North American economies
The European Union (EU) arose from the former European Economic Community(EEC). The signing of the Treaty of Maastricht in Holland in February 1992 created the European Union with a single European market that went into effect the following year. The original 12 member community was increased to 15 with the formation of the EU with the addition of Austria, Finland, and Sweden in 1995. This regional coalition is unique in that it has not only economic goals, but political and social goals. Presently, 10 more countries are looking to become part of the EU and join in the steady economic growth, prosperity and enhanced global presence.
Other regional initiatives throughout the world include the Asia-Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN), and the less successful Latin American Free Trade Association (LAFTA). And potentially the world's largest free trade zone, known as the Free Trade Area of the Americas (FTAA), may be implemented in 2005 which would serve a consumer population in excess of 750 million. Free trade is here to stay.
Activity
Assigned Readings
- Economics Now: Analyzing Current Issues pp. 390 - 398
Assigned Activities
- Complete questions 3, 4, and 5 (page 394)
- Complete questions 2 and 3 on page 397 from the Case Study entitled, 'The Softwood Lumber Dispute'
- Define the terms:
- trading blocs
- free trade area
- NAFTA
- custom Unions
- European Union
- Auto Pact
- Free Trade Agreement
- extraterritoriality
- What the primary benefits to Canada has a member of NAFTA?
- Why was the United States eager to form the NAFTA?
- What are the primary benefits to Mexico as a member of NAFTA?
- With reference to the Softwood Lumber industry, to what extent is the NAFTA effective in dispute settlement?
- Who are the member nations of the ASEAN?
- What is the criteria for membership to ASEAN?
- Why was there international criticism against ASEAN's decision to admit Myanmar as a member?
- What are the principles that guide the functioning of the ASEAN as a multilateral forum?
- Why is the Latin American Free Trade Agreement (LAFTA) considered unsuccessful?
- Who are the fifteen member nations of the European Union (EU)?
- What is the name of the common currency shared by 11 of these nations?
- What are the main economic goals of the EU?
- What is the future outlook of the EU?