01, Sep 2018
Prelims level : Mains level :
- It is a trilateral agreement signed between the North American and a Central American Country the USA, Canada and Mexico.
- It has created one of the world’s largest free trade zone and has raised prosperity of this regions.
- After Implementing NAFTA the volume has tripled reaching US$ 946% billion.
- Due to Trump administration the deal has been criticized for various purpose. Some of the PRO’s and Con’s are discussed below.
- Before NAFTA came into existence, the Mexican Products are taxed at an exorbitant rate of 20%. After NAFTA the tariff fall to 0%.
- Consequently, Mexican’s food items like avacados and shoes started entering freely. Over a decade the trade exploded and benefited Mexico agriculture market from Mangoes to beer.
- Due to availability of unskilled labour the manufactured items like shoes was cheap and indigenous USA industry cannot compete as USA has more skilled labour.
- It has kept the food price much low in the USA.
- It is a win-win situation for both the countries.
- Due to low cost goods the Mexico, the Indigenous shoe industry has lost its consumer’s.
- As a result. The companies has to shut down and the business that it supports like neighbouring coffee shop etc. Also gets shutdown.
Consequences if NAFTA scrapped:
- No Such big deal has ever been scrapped before so this will be a unpredicted move.
- Canada’s economy may be slowed down to some extent recession will happen.
- In the USA the inflation especially in food and manufactured product may spike. As a result, the overall inflation will exceed the limits.