The Revision of NAFTA

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The Revision of NAFTA
INTRODUCTION
Free Trade is an idea popularized by the economist David Ricardo back who encouraged
free trade between two nations with little to no limitations and restrictions as possible. In FreeTrade countries, both the economies can prosper and have higher growth rates due to the
exchange of manufactured goods with each other. It is as efficient as trading between
neighboring states, cities, and towns.
Free Trading allows each country to produce and manufacture goods that they excel at,
which gives them a comparative advantage overall. The comparative advantage idea was made
popular by the economist David Ricardo in the book “On the Principles of Political Economy
and Taxation.” Adam Smith, who is known as the father of capitalism also advocated the
division of labor, in which each laborer who specializes in a certain skill gets to provide his
services to the enterprise.
Every country has an advantage of producing goods that they are better at making
compared to another country. Instead of the U.S producing everything, including the things they
aren’t good at can be very costly and bad for the economy, whereas if they provide their
specialization to another country while asking for theirs in return, it benefits both the economies
at much lower cost and maximum returns. For Example, both Japan and America are good at
manufacturing cars, but if someone in Japan prefers American cars over the Japanese, and if 
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someone in America prefers Japanese cars over American, it benefits both the countries. If
Mexico has avocados that the U.S can’t grow in abundance, and the U.S provides corn in return,
it benefits both the countries due to the comparative advantage. Free trading helps both
economies grow without spending too much and using as little resources as possible. (Driesen)
Although, today free trade has a different meaning as no country in the world practices
100% free trade, as each country have its own sets of limitations and restrictions. The U.S has
the NAFTA agreement which is a free trade agreement between Canada, Mexico, and the U.S to
practice free trade. What Free-Trade means now is that a country which sets as few limitations as
possible when it comes to trading between two countries. Each country has its own set of taxes
(tariffs) that they set on each import, and there are limitations to how many goods can be
imported into the country, also known as quotas.
There are mixed opinions on whether Free Trade is a good idea or bad. Some people who
are against the idea of capitalism say free trade only makes the corporations richer while
promoting inequality among the poor. If free trade grows wealthier, the poor do not get to benefit
from it as much as the rich corporations. Free Trading worries people in rich countries that their
jobs could be taken away from them and moved to overseas whereas the developing countries
worry that by giving control to these corporations their economies could be under the control of
the richer countries. Some developing countries see it as a good opportunity as it helps them
promote development. People who are for Free Trade say it brings Comparative Advantage
(Golob).
NAFTA AGREEMENT
The United States is a trading partner with several countries all over the world, but two of
its biggest trading partners are Canada and Mexico. All three countries can trade freely without 
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any tariffs on the imports and exports under NAFTA (North American Free Trade Agreement).
The NAFTA agreement deal was drafted back in 1987 under President Ronald Reagan, but the
NAFTA agreement was signed back in 1994, it was an agreement signed by US president
George H.W Bush, Mexico’s President Carlos Salinas and Canada’s Prime Minister Brian
Mulroney.
Today, due to NAFTA agreement almost $1.4 billion worth of goods cross the MexicoU.S border each day. Corporations can also move their operations between these countries
without any hassle. The NAFTA agreement made free trade possible between the three countries
without there being as fewer limitations and restrictions as possible. All three countries were able
to provide their specialties to one another without any hassle. NAFTA was formed so all three
countries could boost their economies and see faster growth. If a country wants to withdraw from
the NAFTA agreement, it has to give a six months’ notice (Caliendo).
THE USMCA TRADE DEAL
President Donald Trump has recently negotiated the NAFTA deal and renamed it to
USMCA agreement. Other than the name not much has changed in the free trade deal. President
Donald Trump had been keen on renegotiating the NAFTA deal because he said it had cost the
Americans millions of jobs. During his electoral campaign, he often criticized NAFTA for being
the worst trade deal ever and claimed to pull out of the NAFTA agreement as soon as possible
and negotiate with the r