The EU vs the NAFTA
The EU is the biggest free trade block in the world. Its economic success is unquestionable with countries queuing to become members. In response the USA promoted a free trade zone – NAFTA. It does not appear to have had the same success. Using the trade theories studied in class, can you explain why the success of the EU and the difficulties of NAFTA?
The real problem in the Nord American Free Trade Agreement is that there are 2 super powers EU and Canada and one developing country way behind the other two, this country is Mexico. Capital is the problem, technology is the problem, and these two countries create products very elaborated for Mexico. There is a lot of difference between the 2 nations that are developed countries and Mexico. In the Product Life Circle Theory, the product always comes out in the US and in Mexico always buy it more expensive, Mexico is trading a lot of things with the US for little so the US and Canada are innovating products and Mexico is buying them. The differences of culture is enormous the Canadians and the American share a lot in common like the language and their ancestors while Mexico is a 100 percent Latin Country.
The European Union is different; all the countries that created it were developed countries. The Union helped all the countries and more countries started to join it. The evolution is homogeneous while in the NAFTA is not. The capital of the countries is more similar between them, not the countries that are entering. There are not boundaries while in the frontier with Mexico and the US there is a wall.
In the Theory of Absolute Advantage and Comparative Advantage applies very well in the European Union, some countries are more specialized in on product and some aren’t even if they are very close in production they will specialized and make more of the product. These theories cannot be applied in the NAFTA because Mexico depends almost %100 in the US their imports are 90% from the US and their exports are 90% to the US. Even if Mexico has a lot of Raw Material and Oil, they are too small for the US and Canada. The NAFTA helped Big Enterprises come to Mexico witch created and is creating the ruin of medium and small enterprises.
The Factor Proportion Theory applies in both agreements. Mexico has a lot of land and hand labour not qualified and in the US is totally different. In the EU union especially the new countries that are joining it their land and hand labour are cheaper.
By Eugenio RamÃrez
