Question

Select one specific trade agreement (such as NAFTA, EU, etc.) and discuss the benefits the member countries have by participating in that trade agreement. Provide an example

Answer 1

Countries enter into trade agreements when they believe thatthe benefits from participating outweighs the costs.

For example. In the case of NAFTA - North American Free Trade Agreement - the participating member countries - United states, Canada and Mexico - benefit in a number of ways:

i) Increase in trade

Between 1993 and 2018, trade between the three member countries of NAFTA quadrupled from $297 billion to $1.23 trillion. This led to a boost in economic growth, profits and jobs for the three countries.

ii) Lower prices

A reduction in import tariffs for member countries led to a fall in import prcies, thus resulting in a fall in inflation rate in the economy.

iii) Increase in Foreign Direct Investments

With the enactment of NAFTA, US foreign direct investments in Canada and Mexico increased manifolds. Particularly, in 2017, U.S. investors invested $391.2 billion into Canada and $109.7 billion into Mexico.

iv) Increase in economic growth and job creation

The losening of trade restrictions between member nations lead to an increase in exports and economic growth between nations, which in turn leads to rise in teh number of jobs.