One of the ways through which countries open up their borders, cooperate, and maintain stability with each other is through regional integration. This process is secured through agreements that spell the extent and nature of the cooperation. The most common form of integration is regional trade, which is regulated by a regional trade agreement, often between two or more governments. This paper shall focus on three of such trade agreements, which are; North American Free Trade Agreement (NAFTA), the BREXIT Withdrawal Agreement, and the Trans-Pacific Partnership Agreement (TPP)—noting to highlight their main advantages and weaknesses, followed by a brief commentary on recommendations that would alleviate their shortcomings.
The North American Free Trade Agreement (NAFTA).
NAFTA came into commencement on 1 January 1994. This Agreement had a groundbreaking impact seeing as it created the largest free trade area in the world, which spans between the Mexico, the United States, and Canada (Congressional Research Service Report, 2017). While there have been numerous issues regarding the Agreement that have prompted the United States to push for its renegotiation, the 2017 Congressional Research Service Report has found several excellent outcomes achieved by NAFTA.
The Agreement has reduced and eliminated tariffs between NAFTA members, which has resulted in a tripling in trade. For instance, the elimination of tariffs influences the United States to prefers to buy oil from Mexico because it is cheaper. Secondly, the United States has seen its economy grow by up to 0.5% per year, as a result of the trade activities facilitated by NAFTA. Thirdly, there has been a creation of job opportunities between the member countries. Some of the United State’s free trade agreements that are built of NAFTA have seen the creation of up to 5.4 million jobs.
Furthermore, the foreign direct investment between these countries has more than tripled since the inception of NAFTA. The 2017 Congressional Report shows that the United States increased FDI from $69.9 billion in Canada in 1993 to $352.9 billion in 2015 and in Mexico from $15.2 billion in 1993 to $104.4 billion in 2012. Additionally, Mexico ramped up investment in the United States by 1283% over the same period, while Canada’s FDI increased by 911% (Kimberly, A., 2020).
While there are other disadvantages of the agreement, the major one is the effect it has had on Mexico. The creation of a free trade area permitted the United States to introduce overly subsidized farm commodities into Mexico that ultimately put local farmers out of business, due to their inability to equally compete with the cheaper products. The Economic Policy Institute estimates that over one million Mexican farmers faced this harsh reality. The ripple effect was that such farmers had to illegally find their way to the U.S. in search of work, even in unsafe and unsanitary conditions. This increased the number of illegal migrants in the U.S. from Mexico.
The BREXIT Withdrawal Agreement.
This Agreement entered into force on 1 February 2020. It consists of two main agreements: The Withdrawal Agreement that includes a Protocol on North Ireland and Ireland, as well as a political declaration that spells out the substructure of the future relationship between the European Union and the United Kingdom. The Agreement has been credited for taking into consideration several aspects.
Protection of the rights of citizens of the European Union living in the United Kingdom and vice versa is guaranteed, which includes their right to stay and build their communities (European Commission). There is a transition period that allows for further negotiation for fair terms of the interaction between the states in the European Union and the United Kingdom. The Agreement further features a financial settlement that ensures both parties meet the obligations that had been agreed on while the U.K. was still an E.U. member.
The financial settlement featured in the Agreement is 33 billion pounds that are to be paid to the European Union by the United Kingdom (U.K. Parliament, 2019). The Agreement also imposes tariffs on each other’s imports, save for goods already ordered, or those on transit. Further, a customs and regulatory border is to be created (Janet, B. J., 2020).
The Trans-Pacific Partnership Agreement.
The TPP was proposed to integrate 12 countries, namely; the United States, New Zealand, Australia, Japan, Brunei, Mexico, Singapore, Chile, Canada, Vietnam, Malaysia and Peru, and was signed by these states in February 2016 but did not enter into force, because the United States withdrew its signature in January 2017. The rest of the countries negotiated a new agreement named the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It became binding on 30 December 2018.
Some salient features of the CPTPP are that it covers a large number of goods and services, such as; telecommunications, financial services, and food safety standards. Secondly, it pushes for all member countries to abolish wildlife trafficking, and non-compliant countries will face penalties (Kimberly, A. 2019). Finally, it is open to taking in more members in the future, such as China, that has shown interest. The aim is to create an even larger area than the North America Free Trade Area.
The CPTPP pushes for a free trade area, which is prejudicial to low-income countries, due to factors such as dumping and unfair competition due to subsidization.
Trade agreements are usually a result of negotiations and bargains. Therefore, the take away is that in cases of undesirable effects, the specific elements of the Agreement should be renegotiated, or referred to the dispute settlement bodies within the system.
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