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Nafta In January 1994, Canada, The United States And Mexico Launched The North American Free Trade Agreement (Nafta)

1690 words - 7 pages

NAFTA

NAFTA
In January 1994, Canada, the United States and Mexico launched the North American Free Trade Agreement (NAFTA) and formed the world's largest free trade area. Designed to foster increased trade and investment among the partners, the NAFTA contains an ambitious schedule for tariff elimination and reduction of non-tariff barriers, as well as comprehensive provisions on the conduct of business in the free trade area. These include disciplines on the regulation of investment services and intellectual property. It also includes provisions for ethical standards. We will also discuss several different views as to the benefits as well as some negative effects of the agreement.
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While these provisions are included in NAFTA for their trade implications, they in effect encompass ethical concerns that belong in corporate codes of ethics. Some of the main provisions of this unparalleled agreement deal with environmental protection. The agreement states that each party is to implement the provisions of the agreement so that "there will be a progressive elimination of all tariffs on goods qualifying as North American."(Litka, 242) Also, NAFTA's ample employment protections are particularly important since Mexico does not enforce the liberal labor guarantees of its constitution that otherwise bear many similarities to U.S. and Canadian labor laws. NAFTA also promotes action to further the two main concepts of fairness and respect for others by promoting free trade, environmental and cultural integrity, and the prevention of actions that fall in the category of foreign corrupt practices as defined by U.S. law (e.g., bribery and money laundering) (Nelton, 12). Among the principles that expand upon the concepts of fairness and respect for others are: Respect for the Rules, Support for Multilateral Trade, Respect for the Environment, and Avoidance of Illicit Operations. From a society's point of view, if these principles are compromised, then corrective action is important. Making incorrect choices concerning employment, trade, intellectual property or environmental protection will lead to undesirable consequences, such as child labor, unfair trade practices, pirating of copyrights and environmental pollution. These actions have undesirable consequences at a societal level. In today's society, organizations are expected to be responsible citizens at home. In our global economy, organizations must also be responsible citizens abroad. This responsibility is enforced by laws and sanctions which organizations must respect or suffer the consequences of legal action.

The free trade that NAFTA has established among the United States, Mexico, and Canada has greatly benefited the U.S. economy. During the years from 1994 to 1997, U.S. trade with Mexico and Canada rose 44 percent. This extensive growth is accredited primarily to the reduction of tariffs. As tariffs were lowered, U.S. goods became cheaper and more competitive in Mexican and Canadian markets, and at this lower price level the quantity demanded of U.S. goods increased. Therefore it becomes less expensive for U.S. firms to supply goods to Canada and Mexico as the supply curve shifts upward. In order to meet the new demand, the firms must hire new workers and increase investment. Between 1994 and 1997, 90 to 160 thousand jobs were created in the U.S. due to the increase of trade with Mexico, and 2.4 million jobs were dependent upon trade with Mexico and Canada (Harbrecht 12). The increase in employment and investment then leads to increased national income. The work of NAFTA has also served to benefit Mexico's economy; in accordance with the United States' economy, Mexico's...

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