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Advantages Disadvantages and Comparisons EU and NAFTA

Info: 2362 words (9 pages) Essay
Published: 18th Jul 2019

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Jurisdiction / Tag(s): US LawInternational LawEU Law

This essay is aimed at comparing the progress of competition strategy that exists between the European Union (EU) and the North American Free Trade Agreement (NAFTA). Realization of competition policy is equally of importance to enlarging the free trade in the two organizations. The two unions are federations but they differ in the status and in the influence (Jones, 2001). The concept of the area economic integrations implies that the countries of geographical area unite in some form of partnership to promote trade and also development. North American Free Trade Agreement (NAFTA) is a good example of free trade region, while the European Union originated from a usual market form of area economic integration to a large economic union.

Similarities and Differences between NAFTA and EU

The foremost character of the Free Trade Area and EU is the liberalization of the trade ruling for the members. Secondly, the removal of the business barriers that are placed against the members and these are inclusive of the removal of the tariffs, the quotas, and several other non-tariff barriers and finally the elimination of the business barriers by certain given deadlines (Steedman, 1999). The other character is the imposition of a usual tariff to non member countries. This implies that the countries that are members of the custom unification vow to liberalize the trade rules and also come up with a common tariff for the countries that are not members.


The United States is advanced than Canada and Mexico in terms of population, the dimension, the value of its economy and worldwide status. In exception of some few defined areas, North American Free Trade Agreement (NAFTA) does not have the usual antitrust policies that exist in the European Union (EU), and these distinctions have expanded since the year 1994. The exact date of North American Free Trade Agreement (NAFTA) as a Council Regulation has promoted the standardization of competition set of laws in the European Union EU, while NAFTA has not been able to refine its own competition policies as initially contemplated. More so North American Free Trade Agreement (NAFTA) does not have the usual supranational institutions that are found in the European Union EU, for example, they have no commission, no court justice and this excludes competition rules from its dispute decision procedures, which in contrary ends up in differences on competition rules that are forwarded to the World Trade Organization (Jones, 2001). The lack of excess robust competition rule within North American Free Trade Agreement (NAFTA) hinders the progress of North America

Regional competition rule and promotes the importance of support measures non-NAFTA.

Advantages of NAFTA and EU

A universal market covers all attributes of a Free Trade Area and of customs unification, while totaling up mobility of aspects of production is the fourth characteristic. Also included is mobility of resources, manual labor, and technology. The mobility of the workforce demands that the countries that are members of the trade union come up with a universal policy of visa and also general position on citizenship. In addition, the member countries comes up with common policies to complement principles, have communal acknowledgment or acceptance of each others measures, or concur on minimum measures. Some of the examples of standards demanding common rules are inclusive of values on subsidies, measures on health and safety, anti-trust values, and professional licensing values (Steedman, 1999).

The other advantage is that the two promote free trade through bringing about economic union. That characteristic is aimed at seeking economic incorporation by harmonizing the fiscal and monetary policies, coming up with a common currency, and also establishing a super-national leading authority. An example is a super-national leading influence is the European Parliament that is established by the European Union countries. Politically coming together is the crucial stage along the area economic incorporation path. A political union comes up with all economic and political union to the members of an economic blending.

The importance of this upcoming provision is that, at this time the European Union (EU) competition ruling is not only standardized at its intensity, but also important at the national level. National competition act should mainly only forbid what European Union law prohibits, and should not allow what EU law does not allow. Contrary, NAFTA does not have common antitrust policies that are consistent right through its vicinity; furthermore the antitrust ruling of the Parties can forbid neither of the performances of the party’s desire without referring to any competition act custom but their personal nationwide policy options. In fact lacking the least average in most cases fails to bode properly for efficient use of antitrust rule in the NAFTA region (Yeats, 2001). The solitary exemption is that NAFTA denotes that state-designated cartels may not apply its monopoly situation to take on anticompetitive performances in a non-monopolized bazaar in its region that negatively affect an outlay of a financier of any other Party, this is inclusive of the discriminatory stipulation of the dominating good or service, acquisitive conduct or the cross subsidization .

The ongoing and comprehensive exclusion of trade obstacles among United States, Mexico and Canada for more than 15 years has fully, phased exclusion of import tariffs. The free trade has also enabled the exclusion of most National Transportation Safety Board (NTBs). The NAFTA and the EU has greatly promoted the security of intellectual rights of property. The procedures of dispute settlement and the Side agreements on ecological security and labor law Mexico has in most cases been able to benefit the most, with access to big industrial bazaars and the upcoming inward savings flow in Canada sustained its first choice in the US souk and hope for later access to South American markets (Trefler, 1995). United States stands to benefit from access to the Mexican Market and inexpensive work force and sections, access to dependable oil supplies, and fewer immigration pressures; in contrast, the benefits are unpretentious. The main United State losers from NAFTA are import-protected trades who are in competition with Mexican producers, and untrained workers.

North American Free Trade Agreement (NAFTA) is the union that successfully brought together the United States with Canada and Mexico business partners. Under Article 102 of the NAFTA Agreed to work cooperatively to do away with barriers to do business in, and ease the cross border association of all goods and services that are between the territories of the Parties; enhance conditions of equal competition in the free trade area; enhance substantially outlay chances in their own territories; provide sufficient and effective security and the enforcement of intellectual property rights in each and every Party’s territory; come up with an effective processes for the execution and use of this Agreement, also for its shared administration and the resolution of all disputes; and come up with a framework for more trilateral, local and multilateral collaboration to increase and improve the benefits of the given Agreement.

NAFTA is a congressional-executive agreement that is accepted by the U.S. Congress and accepted in the United States by the President. Upon endorsement of NAFTA, the tariffs that are levied by the some three countries against each other either were done away with immediately or were phased out over durations of up to about fifteen years (Shiozawa, 2007). The Limits on the total investments were eliminated with the investors that are from any of the three countries that are treated in an equal manner, currency freely changed at market rates, and job performance needs such as sustaining the levels of export and also the trade balancing being removed. Trade in services is liberalized and fair treatment is expected for the service providers and also professionals in every country.

Disadvantages of NAFTA and EU

Some of the main disadvantages include the fact that FTAs are only advantageous when the negotiations are between other trading partners. This therefore implies that the other countries such as Australia are restricted from pursuing their interests. It therefore has restricted other nations from negotiating with them as they end up not benefitting economically. They should come up with ways to encourage other nations to join in the trade negotiation as they would end up benefiting even more if the do away with the restrictive policies.

They also have complicated policies which have been put in place with the aim of blocking the third world countries from bringing their products either directly or indirectly through other parties (Samuelson, 2001). They do this by ensuring that the transaction costs are very high so that they will not see the need to engage in the business as the high tariffs will have contributed to very low profits besides the time and energy consumed. The rules are enforced strictly and the laws which are made various treaties made to ensure that they are not condemned for enforcement of the policies. For any business to take place there are certain standards that must be meet certain standards, there are also various requirements for settling of various disputes that are likely to occur in a business arena.

Through their putting of restrictive rules is a way of undermining democracy. This is because a business and especially an international business should not be inclined to any group of individuals. NAFTA on the other hand discriminates the poor nations from promoting their economy. It is also prejudice since they assume that the poorer countries do not have the ability to make quality products. International policies are expected to promote harmony in the world and especially in this world of globalization ((Bowen, Hollander, & Viane, 1998). It also means that there is poor governance among the managers since they should have detected the problems in their policies and amended them. Although many poor countries would want to form trade organizations, many would not want to emulate NAFTA as they have not set a good example to the rest of the world irrespective of the success they have so far.

NAFTA has also affected the job fields in that many jobs are closed leaving many job less. The jobless are left to no alternatives thus in most situation in the desire to survive they engage in social crimes such as stealing, promotion of prostitution among other social evils that lead to moral degradation (Yeats, 2001). It has also proved to depress the wages for the already working groups thus promoting poverty even for the workers due to the increase tariffs which forces the business administrators offer poor wages so that they are also left with some profit margin. This therefore means instead of formation of NAFTA basic raising the living standards of the affected group it is doing the contrary and to worsen it favors corrosion of morals for the people leading to increased levels of insecurity which also discourage investors to invest in the unstable nation which in turn destabilizes the economy of the country (Krugman, & Obstfeld, 1999). The management of NAFTA should therefore go through the policies again so that they amend the parts affecting the other interested nations and the existing ones negatively.

They have also led to decreased rights to the citizens of the involved nations. They have instead opted to give so much power to the governance of NAFTA, the strake holders and other involved stake holders. It has therefore put a lot of considerations to the Western nations which have the privilege of wealth and power over them and making them to be controlled by them so that they would find favor from them. The therefore seem to lose their independence and rely on them even on basic thing because they have been made to believe they have no quality products.

The common things between European Union and NAFTA are that they both aim at reducing the barriers which exist between the two organizations and this is with the aim of promoting trade. The only problem is that they do this so as to improve on the trade not with other groups but between them. They achieve this by reducing tariffs in the goods they intend to trade and those that affect them both. They have also ensured that politics have no hand in what they do to ensure that their decisions are not affected by the political moves this have ensured stability for the two organizations (Bowen, Hollander, & Viane, 1998). This means that the organizations are set to benefit the powerful nations of the world and taking advantage of the third world nations since they get raw materials from them but they do not want to accept their products.

In conclusion, it is important to realize that the most important reason for the formation of Free Trade Agreements and the European Union is to ensure there is labialization in the business world and especially among the involved nations (McKenzie, 1994). They have also been able to achieve since the parties involved are few and belong in the same region. It is therefore easier to access them and have the negotiations without problems and they have no desire of engaging in multilateral agreements as the take long and difficult procedures in operating them. The organizations have also to ensure that they have policies that will not only enhance economic growth but also strengthen the organizations themselves. They should however come up with ways of liberalizing the trade sectors so that not only the member parties to benefit but even those outside should have an influence. They should also work to improve on the policies that promote democracy for all.

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