Free Trade: A Breakdown

Free Trade increases the prosperity, standard of living, and foreign relations of countries that belong to international trade agreements. International trade agreements are beneficial for countries, so that countries have the opportunity to unite under certain conditions for the betterment of their respective economies. NAFTA, ASEAN, and the EU are all respected trade organizations that promote free trade. Each organization has worked to raise the standard of living of member countries and raise the national economies of member countries.

Tariffs, quotas, embargoes, standards, and subsidies are all valuable aspects of why trading organizations are formed. Tariffs are taxes that are put on an item upon entry to a country. Trading organizations are generally formed to reduce tariffs, so businesses can prosper and the economies of the member nations will rise. Quotas are an allotted or limited amount. Quotas in trade are restrictions placed either on or off items that determine the quantity of a particular product that can be imported or exported. An embargo is a government order that imposes a trade barrier. These are pertinent when countries have too many of a particular item or an embargo can sometimes be placed for persuasion purposes (foreign policy). Standards are regulations that are imposed and have to be followed according to government regulation. Standards are the areas in which countries have to do the most negotiating when coming to a consensus on a trading agreement, because each country has individual standards, so coming up with conjoined standards can sometimes cause problems. Subsidies are financial assistance that is paid out to a specific industry or business. An example of this is corn farmers. They are paid for their extra crops year after year, even though the extra crops do not circulate into the food market. This has been a problem for NAFTA, because American farmers have been getting subsidies, while Mexican farmers have been getting little or no subsidies. This has been a concern, because the trading is not fair if both sects of farmers are only allowed to sell a set amount of corn, but one gets paid for the extra.

NAFTA (North American Free Trade Agreement) was implemented on January 1, 1994, due to the Clinton Administration’s rigorous lobbying for the trading alliance, which was originally started by the George H. W. Bush Administration. In 1988, Canada and the United States signed into effect the Canada-United States Free Trade Agreement; which would preface NAFTA. Shortly after, Mexico entered into trade agreement talks with the United States, and Canada also wanted to be included. The atmosphere of world trade was for expanding trade blocs, with the establishment of the European Union in 1993. The negotiations started in the George H. W. Bush Administration, but had to be passed on to the Clinton Administration. Clinton added extra provisions that would protect American workers and also pass loose environmental laws into effect with the passing of the NAFTA legislation. The initial main benefit of NAFTA was to eliminate tariffs that existed between the three countries.