3. NAFTA, the North American Free Trade Agreement, was signed by the United States, Canada, and Mexico. NAFTA was signed in 1993 and went into effect on January 1, 1994.

4. NAFTA was written to create a Free Trade Area in North America.  “Free Trade” means that countries may freely trade goods with each other without having to pay a tariff (tax) on those goods.  In other words, “free trade” means no trade barriers.

5. The purpose of the agreement is to:  Allow free movement of goods and services among the countries.  Promote competition in the free trade areas.  Protect the property rights of people and businesses in each country.  Be able to resolve problems that arise among the countries.  Encourage cooperation among countries.

6. Most economists agree that the agreement has been good for the countries involved. What-Should-You-Know

7.  Free trade increases sales and profits for Mexico, Canada and the U.S.A., thus strengthening their economies.  Lack of tariffs has allowed Mexico to sell its goods in the USA and Canada at lower prices. This makes Mexican products more competitive in these markets and increases Mexico’s profits as it tries to develop its economy.  Free trade has lowered the price of many goods for American consumers.

8. a. “NAFTA Members Prepare for Picnic!” b. “NAFTA Members Graciously Share Business Ventures!” c. “NAFTA Members Cover Up Conspiracy!” d. “NAFTA Members Vie For Business!”

10.  Free trade has caused more U.S. jobs losses than gains, especially for higher- wage jobs. › Factories, called Maquiladoras, are built on the Mexican border and workers are hired to make goods at a much lower wage than workers would be paid in the U.S.A. maquiladoras

11.  Minimum Wage Mexico - $3.40 per day vs. US - $5.15 per hour  Example: Hourly compensation costs for production workers in manufacturing Mexico - $1.21 vs US - $17.70 › (Global Trade Watch, The NAFTA Index, October 1, 1998)The NAFTA Index

12.  These factories make many types of products.

13.  3 Day Blinds  20th Century Plastics  Acer Peripherals  Bali Company, Inc.  Bayer Corp./Medsep  BMW  Canon Business Machines  Casio Manufacturing  Chrysler  Daewoo  Eastman Kodak/Verbatim  Eberhard-Faber  Eli Lilly Corporation  Ericsson  Fisher Price  Ford  Foster Grant Corporation  General Electric Company  JVC  GM  Hasbro  Hewlett Packard  Hitachi Home Electronics Honda Honeywell, Inc. Hughes Aircraft Hyundai Precision America IBM Matsushita Mattel Maxell Corporation Mercedes Benz Mitsubishi Electronics Corp. Motorola Nissan Philips Pioneer Speakers Samsonite Corporation Samsung Sanyo North America Sony Electronics Tiffany Toshiba VW Xerox Zenith

14. United States  They can move their factories to Mexico and ship the goods to the US with no tariffs.  They would not have to pay the workers in Mexico as much as in the United States.  They would be able to sell their product for cheaper, but still make a good profit  Many American factory workers lose their jobs because the owners move the factories to Mexico. American factory workers cannot move to Mexico to keep their jobs.  Goods made in Mexico would cost a lot less because labor is cheaper there. Mexico  They would not like foreign owned factories because they would create competition and hurt Mexican owned businesses.  Maquiladoras would provide jobs for Mexicans, but the profit made by maquiladoras would go back into the US economy, not into Mexico’s  It would provide a job in a country where there are not enough jobs  However, the wages are very low and the working conditions are not good  Building factories creates pollution. Environmentalists would want to make sure that Mexico had laws to protect the environment. Good or Bad?

15. EU = An organization of European countries that promotes free trade among member nations. The goal is to improve the economy in Europe. How do you become a member? -Countries apply to the EU for membership. -The countries must provide financial information to the EU. They are analyzed to ensure that are financially stable and strong. The Euro -17 out of the 27 EU members use the same money called the Euro. -The Euro is worth more than the U.S. dollar. (1 Euro = $1.42) History of the EU Greece trouble

17. The growth of international trade has led to greater economic interdependence. Interdependence = the shared need of countries for resources, goods, services, labor, and knowledge supplied by other countries Because countries are interdependent, changes in one country’s economy influences other countries.

18.  Modern societies limit trade in several ways.  Tariff – tax on goods imported.  Quota – A numerical limit on the amount of a good that can be imported.  Subsidy – a gov. payment that supports a business or market.  Embargo - a ban on trade with a particular country. Why Do Nations Restrict Trade?

19. › Supporters of trade barriers and agreements argue that they  save jobs  protect infant industries  safeguard national security › Critics of trade barriers and agreements argue that free trade is the best way to  pursue comparative advantage (use resources efficiently)  raise living standards  further cooperative relationships among nations