Regional Economic Integration

Regional Economic Integration
Chapter 8 Regional Economic Integration Chapter 8: Regional Economic Integration

What Is Regional Economic Integration?
Regional economic integration - agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other Question: Do regional trade agreements promote free trade? In theory, yes, but the world may be moving toward a situation in which a number of regional trade blocks compete against each other Are you familiar with NAFTA? How about the European Union? Do you know what these agreements are and why they’re important to international companies? Both NAFTA and the European Union, or EU, are forms of regional economic integration -- agreements between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. In other words, these agreements are designed to promote free trade, and depending on the level of integration, allow the factors of production to move freely between countries. To get a better idea of what we’re getting at here, imagine if the U.S. was actually a group of countries that had signed an agreement to become a political union. As you know, goods move freely between states as do the factors of production like labor and capital. There are no tariffs that limit California exporting oranges to Ohio for example. Similarly, you don’t have to get a permit to work in New York if you live in New Jersey. So, workers go where they can be most productive, industry goes where it can be most efficient. The idea behind regional economic integration is that without trade barriers, member countries will be better off. However, there is some concern that as more countries become involved in regional agreements, the trading blocs will begin to compete against each other. Let’s look at the different levels of economic integration, and explore some of the trading blocs that exist today.

What Are The Levels Of Regional Economic Integration?
A free trade area eliminates all barriers to the trade of goods and services among member countries European Free Trade Association (EFTA) - Norway, Iceland, Liechtenstein, and Switzerland North American Free Trade Agreement (NAFTA) - U.S., Canada, and Mexico A customs union eliminates trade barriers between member countries and adopts a common external trade policy Andean Pact (Bolivia, Columbia, Ecuador and Peru) A common market has no barriers to trade between member countries, a common external trade policy, and the free movement of the factors of production MERCOSUR (Brazil, Argentina, Paraguay, and Uruguay) There are five levels of economic integration, the free trade area, the customs union, the common market, the economic union, and the political union. A free trade area removes all barriers to the trade of goods and services among member countries, but members determine their own policies toward nonmembers. The European Free Trade Area (EFTA), between Norway, Iceland, Liechtenstein, and Switzerland, is the most enduring free trade area. Another well-known free trade area is the North American Free Trade Area or NAFTA. We’ll talk more about NAFTA later. A customs union eliminates trade barriers between members, and adopts a common policy toward nonmembers. The EU began as a customs union, but as we’ll discuss later, it’s moved beyond this level of integration. The Andean Pact between Bolivia, Columbia, Ecuador, and Peru is a current example of a customs union. A common market has no barriers to trade between members, a common policy toward nonmembers, and the free movement of the factors of production. This is a significant step up from a customs union, and requires members to cooperate on fiscal, monetary, and employment policies. The EU was a common market for many years before moving to the next level of integration. Eventually, MERCOSUR, an agreement between Brazil, Argentina, Paraguay, and Uruguay, hopes to become a common market.

An economic union has the free flow of products and factors of production between members, a common external trade policy, a common currency, a harmonized tax rate, and a common monetary and fiscal policy European Union (EU) A political union involves a central political apparatus that coordinates the economic, social, and foreign policy of member states The EU is headed toward at least partial political union, and the United States is an example of even closer political union The next level of economic integration is the economic union which involves the free flow of the factors of production between members, the adoption of a common external trade policy, a common currency, harmonization of tax rates, and a common monetary and fiscal policy. So, again this is a significant increase in integration from the previous level. The EU is currently an imperfect example of an economic union. As we’ll discuss later, not all members have adopted the common currency, and there are still differences in tax rates across the countries. Finally, in a political union, independent states are combined into a single union where the economic, social, and foreign policy of members is coordinated. If you think that this description could fits the U.S., and you’re right! The EU is also headed toward this level.

Levels of Economic Integration Here you can see the different levels of economic integration.

Why Should Countries Integrate Their Economies?
All countries gain from free trade and investment - regional economic integration is an attempt to exploit the gains from free trade and investment Linking countries together, making them more dependent on each other creates incentives for political cooperation and reduces the likelihood of violent conflict gives countries greater political clout when dealing with other nations Why do countries agree to integrate their economies? Countries integrate for both economic and political reasons. Let’s look at the economic reasons. We know from our discussion of trade theory in Chapter 5 that free trade is beneficial to countries. Recall, also from our discussion in Chapter 7, that, for various reasons, trade barriers still exist despite the efforts of the WTO. Regional economic integration offers countries a way to achieve the gains from free trade, at least on a limited basis, more quickly than would be possible under the WTO process. The political case for integration has two main points. First, by linking countries together, making them more dependent on each other, and forming a structure where they regularly have to interact, the chance for violent conflict and war decrease. Second, economic integration gives the bloc of countries greater clout and makes them much stronger politically when dealing with other countries than if they were to act independently.

What Limits Efforts At Integration?
Economic integration can be difficult because while a nation as a whole may benefit from a regional free trade agreement, certain groups may lose it implies a loss of national sovereignty Regional economic integration is only beneficial if the amount of trade it creates exceeds the amount it diverts trade creation occurs when low cost producers within the free trade area replace high cost domestic producers trade diversion occurs when higher cost suppliers within the free trade area replace lower cost external suppliers If integration is beneficial, why doesn’t it occur more often? Two key issues limit integration: First, while a nation as a whole benefits from integration, some groups may actually lose. You might recall that critics of NAFTA for example, were concerned about the potential for job loss in the U.S. if companies shifted production to take advantage of Mexico’s low cost labor. Second, countries that integrate their economies lose some degree of national sovereignty. Integration requires that countries give up some control over monetary policy, fiscal policy, and trade policy. You probably know for example, that most of the countries belonging to the EU have given up their currencies and adopted the euro instead. Some economists point out that integration only makes sense when the amount of trade it creates is greater than the amount that is diverting. Trade creation occurs when low cost producers within a free trade area replace high cost domestic producers, while trade diversion occurs when higher costs suppliers within a free trade area replace lower cost external suppliers.

What Is The Status Of Regional Economic Integration In Europe?
Europe has two trade blocs The European Union (EU) with 27 members The European Free Trade Area (EFTA) with 4 members The EU is seen as the world’s next economic and political superpower Where can we see successful examples of regional economic integration? In Europe, there are two examples: the EU which is the world’s most integrated group of countries with 27 members, and the European Free Trade Area with four members. The EU is expected to be the world’s next economic and political superpower, so let’s look at it more closely.

What Is The Status Of Regional Economic Integration In Europe?
Member States of The European Union in 2009 Here you can see a map of the countries that comprise the European Union. As you can see, the original agreement between Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands was expanded in 1973 to include Great Britain, Ireland, and Denmark. In 1981, Greece joined, then Spain and Portugal in 1986, and Austria, Finland, and Sweden in Ten more countries joined in 2004, and three more in 2007.

What Is The European Union?
The devastation of two world wars on Western Europe prompted the formation of the EU Members wanted lasting peace and to hold their own on the world’s political and economic stage Forerunner was the European Coal and Steel Community (1951) The European Economic Community (1957) was formed at the Treaty of Rome with the goal of becoming a common market The Single European Act (1987) committed the EC countries to work toward establishment of a single market by December 31, 1992 was born out of frustration among EC members that the community was not living up to its promise provided the impetus for the restructuring of substantial sections of European industry allowing for faster economic growth than would otherwise have been the case The European Union is the result of the devastation of two world wars on Western Europe and a desire to create lasting peace, and the desire by the European nations to hold their own in the world. The forerunner to the EU was the European Coal and Steel Community, which was formed in 1951 to remove trade barriers in coal, iron, steel, and scrap metal. Then, in 1957, the European Economic Community was formed with the goal of becoming a common market. The European Community became the European Union in 1994 after the Maastricht Treaty was ratified. We’ll talk more about that later. The Single European Act had a profound effect not only on Europe, but the rest of the world as well. It was adopted in 1987, and committed members of the EU to work toward the establishment of a single market by December 1992. The Single European Act was a sort of last ditch effort to get members to commit to actively focus on moving forward. Until this Act, the EC had fallen short of its goals. The Single European Act set a number of goals. First, all frontier controls were to be removed between member countries. Second, there was to be mutual recognition of product standards so that products developed to meet standards established in one country also were accepted in other countries. Third, public procurement was to be opened to non-national suppliers. Fourth, barriers to competition in retail banking and insurance were to be lifted. Fifth, all restrictions to foreign exchange transactions between members were to be removed. Sixth, restrictions on cabotage, or the right of foreign truckers to pick up and deliver goods within another member’s borders, were to be eliminated. Together, it was expected that these changes would lower the cost of doing business in the EU, but they were also expected to complicate supply side effects.

What Is The Political Structure Of The European Union?
The European Council - resolves major policy issues and sets policy directions The European Commission - responsible for implementing aspects of EU law and monitoring member states to ensure they are complying with EU laws The Council of the European Union - the ultimate controlling authority within the EU The European Parliament - debates legislation proposed by the commission and forwarded to it by the council The Court of Justice - the supreme appeals court for EU law Five institutions govern the EU. The European Council resolves major policy issues and sets policy directions. The European Commission is responsible for implementing EU law and monitoring member states to be sure they’re in compliance. The Council of the European Union is the ultimate controlling authority. The European Parliament debates legislation proposed by the commission and forwarded to it by the council. The Court of Justice acts as the supreme appeals court for EU law. You can learn more about each of these institutions, and their responsibilities in your text, and see an example involving the European Commission in the Management Focus.

What Is The Euro? The Maastricht Treaty committed the EU to adopt a single currency created the second largest currency zone in the world after that of the U.S. dollar used by 16 of the 27 member states Britain, Denmark and Sweden opted out since its establishment January 1, 1999, the euro has had a volatile trading history with the U.S. dollar The next key event in the evolution of the EU was the signing of the Treaty of Maastricht in The agreement committed members to adopt a single currency by This created the single largest currency zone in the world after the U.S. dollar. Euro notes and coins started circulating in 2002. Remember though, that three members, Britain, Denmark, and Sweden opted out of the euro zone. What’s happened to the value of the euro so far? Since its establishment, it’s had a volatile trading history relative to the U.S. dollar. It initially fell relative to the dollar, but by April of 2009 it was €1=$1.31! Keep in mind that a strong euro isn’t attractive to everyone! It’ll make it harder for euro zone companies to export!

Is The Euro A Good Thing? Benefits of the euro Costs of the euro
savings from having to handle one currency, rather than many it is easier to compare prices across Europe, so firms are forced to be more competitive gives a strong boost to the development of highly liquid pan-European capital market increases the range of investment options open both to individuals and institutions Costs of the euro loss of control over national monetary policy EU is not an optimal currency area Why adopt a common currency? Well, there are several reasons. Having one currency, rather than several, is easier for companies and individuals. Instead of having to convert currencies, the same currency is used across the bloc, so companies will save the cost and risks of converting currencies. Having a single currency will also make it easier to compare prices across Europe. Think of the U.S. for example. You can easily compare the price of a Big Mac across the country. Adopting a single currency will make it easier to do the same thing in Europe, and force companies to lower prices. The lower prices should then encourage producers to look for ways to reduce their production costs in order to maintain their profit margins. So, by adopting a common currency, we should see greater efficiency. Another benefit of the euro is that it should boost the development of a highly liquid pan-European capital market. Finally, the capital market will provide a greater range of investment options to individuals and institutions. While there are many benefits of adopting the euro, there are also some disadvantages. A major cost involved in adopting a common currency is that individual countries lose control over monetary policy. The three countries that opted out of the euro zone did so because they didn’t want to give up this autonomy. A second disadvantage of the euro is that the EU is not an optimal currency area, or an area where similarities in the underlying structure of economic activities make it feasible to adopt a single currency and use a single exchange rate as an instrument of macro-economic policy. In other words, because of differences in member economies—take Portugal and Finland for example—they might react differently to external shocks. So, a change in the euro exchange rate that helps Finland might actually hurt Portugal. Some critics have argued that instead of establishing the euro and then moving toward political union, the EU should have achieved political union status first.

Should The EU Continue To Expand?
Many countries have applied for EU membership Ten countries joined in 2004 expanding the EU to 25 states In 2007, Bulgaria and Romania joined bringing membership to 27 countries Turkey has been denied full membership because of concerns over human rights What’s ahead for the EU? Perhaps further expansion. Several countries, particularly those from Eastern Europe have applied for membership. Romania and Bulgaria recently joined, but will have to wait to participate in the euro zone. Even without further expansion though, the union is likely to get more complicated thanks to the 10 new members that joined in 2004.

What Is The Status Of Economic Integration In The Americas?
There is a move toward greater regional economic integration in the Americas The biggest effort is the North American Free Trade Area (NAFTA) Other efforts include the Andean Community and MERCOSUR A hemisphere-wide Free Trade of the Americas is under discussion What does regional economic integration look like in the Americas? Well, while the level of integration in the Americas is still relatively low compared to what’s been happening in Europe, it’s on the rise. The biggest effort so far is the North American Free Trade Area or NAFTA. Some smaller efforts include the Andean Pact and MERCOSUR. There is also some discussion of forming a hemisphere-wide Free Trade of the Americas.

What Is The Status Of Economic Integration In The Americas?
Here you can see the most significant effort at integration in the Americas involving Canada, the U.S., and Mexico in the NAFTA. The Andean Community and MERCOSUR are also efforts at integration. Let’s look more closely at each of there beginning with NAFTA.

What Is The North American Free Trade Agreement?
The North American Free Trade Area (NAFTA, 1994) includes the United States, Canada, and Mexico abolished tariffs on 99% of the goods traded between members removed most barriers on the cross-border flow of services protects intellectual property rights removes most restrictions on FDI between the three member countries allows each country to apply its own environmental standards establishes two commissions to impose fines and remove trade privileges when environmental standards or legislation involving health and safety, minimum wages, or child labor are ignored NAFTA, the agreement between the U.S., Canada, and Mexico, became law in 1994. Under NAFTA, tariffs on 99 percent of the goods traded between Mexico, Canada, and the U.S. were abolished, and so were most of the restrictions on the cross-border flow of services. The agreement also protects intellectual property, removes most restrictions on FDI between the three countries, and allows each country to maintain its own environmental standards. In addition, two commissions were established to intervene when environmental standards or legislation involving health and safety, minimum wages, or child labor are violated.

Is The North American Free Trade Area Beneficial?
Supporters of NAFTA claimed that Mexico would benefit from increased jobs as low cost production moves south and will see more rapid economic growth as a result the U.S. and Canada would benefit from access to a large and increasingly prosperous market the lower prices for consumers from goods produced in Mexico low cost labor and the ability to be more competitive on world markets What are the benefits of NAFTA? NAFTA’s supporters argue that it’ll provide economic gains to all members. Mexico should benefit from more jobs as companies from Canada and the U.S. shift production south to take advantage of lower cost labor. As you know, the jobs will help Mexico grow economically. In the U.S. and Canada, consumers will benefit from the lower priced products that come from Mexico, and companies will benefit not only from low cost labor, but also from having access to a large and more prosperous market.

Is The North American Free Trade Area Beneficial?
Critics of NAFTA claimed that jobs would be lost and wage levels would decline in the U.S. and Canada Mexican workers would emigrate north pollution would increase due to Mexico's more lax standards Mexico would lose its sovereignty How did NAFTA’s critics see the agreement? NAFTA’s critics worried that the loss of jobs and wage levels that was to occur as a result of NAFTA would be detrimental to the U.S. and Canada. They also raised concerns that pollution would increase as companies shifted production to take advantage of Mexico’s more lax environmental regulations. In addition, some critics raised concerns that Mexico would lose its sovereignty as the country became dominated by U.S. firms that weren’t really committed to helping the economy grow, but rather just saw it as a cheap assembly location.

Who Was Right? Research indicates that NAFTA’s early impact was subtle, and both advocates and detractors may have been guilty of exaggeration NAFTA is credited with helping create increased political stability in Mexico Other Latin American countries would like to join NAFTA Who was right? Well, after the first decade of NAFTA, most people agree that both the critics and the supporters of the agreement were probably guilty of exaggeration. For example, studies showed that the concern over jobs turned out to be a non-issue. One positive that has come from the agreement is increased political stability in Mexico. This of course, is also beneficial to the U.S What’s in the future for NAFTA? Perhaps some enlargement. Several other Latin American countries including Chile have indicated that they’d like to join, but for now, the U.S. and Canada are taking a wait and see attitude.

What Is The Andean Community?
The Andean Pact formed in 1969 using the EU model had more or less failed by the mid-1980s was re-launched in 1990, and now operates as a customs union signed an agreement in 2003 with MERCOSUR to restart negotiations towards the creation of a free trade area What are the other regional groupings in the Americas? The Andean Pact between Bolivia, Chile, Ecuador, Columbia, and Peru was formed in 1969, and modeled after the EU. However, by the mid-1980s, it was clear that the Pact had more or less failed to achieve any of its goals. In the late 1980s though, many Latin American countries began to adopt free market policies, and in 1990 the Andean Pact was re-launched, and now operates as a customs union. In 2003, The Andean Community signed an agreement with MERCOSUR to work toward a free trade area.

What Is MERCOSUR? MERCOSUR
originated in 1988 as a free trade pact between Brazil and Argentina was expanded in 1990 to include Paraguay and Uruguay may be diverting trade rather than creating trade, and local firms are investing in industries that are not competitive on a worldwide basis initially made progress on reducing trade barriers between member states, but more recently efforts have stalled What is MERCOSUR? MERCOSUR began in 1988 as a free trade agreement between Brazil and Argentina. It was expanded to include Paraguay and Uruguay in 1990, and has been making progress toward free trade between the countries. However some critics have argued that rather than creating trade, MERCOSUR, by establishing high tariffs to outside countries, is actually diverting trade in some industries, and that companies in these industries would be unable to compete in global markets. In recent years, the future of this group has been shaky.

What Is The Central American Trade Agreement And CARICOM?
There are two other trade pacts in the Americas the Central American Trade Agreement –(CAFTA, 2005) - to lower trade barriers between the U.S. and members CARICOM (1973) - to establish a customs union Neither pact has achieved its goals yet In 2006, six CARICOM members formed the Caribbean Single Market and Economy (CSME) - to lower trade barriers and harmonize macro-economic and monetary policy between members There are two other trade agreements in the Americas, the Central American Trade Agreement and CARICOM. The Central American Trade Agreement began as the Central American Common Market and was established in the 1960s between Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The Dominican Republic joined a bit later. The U.S. agreed to form a bilateral free trade agreement with the group in 2005, and since then, there’s been a move to lower trade barriers between the group and the six countries. CARICOM was an agreement between English speaking countries that was signed in However, the group never really accomplished its goals, and in 2006, the Caribbean Single Market and Economy was established with the goal of creating a grouping modeled after the EU.

What Is Free Trade Of The Americas?
Talks began in April 1998 to establish a Free Trade of The Americas (FTAA) by 2005 The FTAA was not established and now support from the U.S. and Brazil is mixed the U.S. wants stricter enforcement if intellectual property rights Brazil and Argentina want the U.S. to eliminate agricultural subsidies and tariffs If the FTAA is established, it will have major implications for cross-border trade and investment flows within the hemisphere would create a free trade area of 850 million people who accounted for nearly $18 trillion in GDP in 2008 What about the Free Trade Area of the Americas? Talks began in 1998 to establish a Free Trade Area of the Americas by The goal wasn’t met, and discussions are still underway. If the FTAA is established, it will create a free trade area of about 850 million people. However, progress is uncertain at this point. The U.S. wants tougher enforcement of intellectual property rights and lower manufacturing tariffs, and Brazil and Argentina want the U.S. to lower its agricultural subsidies. Since there appears to be little effort to compromise, the agreement has stalled for the moment.

What Is The Status Of Economic Integration In Asia?
Various efforts at integration have been attempted in Asia, but most exist in name only Association of Southeast Asian Nations (ASEAN) Asia-Pacific Economic Cooperation (APEC) Has there been any move toward economic integration in either Asia? Yes! One of the most important efforts is the Association of South East Asian Nations, or ASEAN.

What Is The Association Of Southeast Asian Nations?
The Association of Southeast Asian Nations (ASEAN, 1967) currently includes Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Myanmar, Laos, and Cambodia wants to foster freer trade between member countries and to achieve some cooperation in their industrial policies An ASEAN Free Trade Area (AFTA) between the six original members of ASEAN came into effect in 2003 ASEAN and AFTA are moving towards establishing a free trade zone ASEAN was formed in 1967 and includes Brunei, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. ASEAN’s goals are to promote free trade between members, and achieve cooperation on industrial policy, but so far, it hasn’t made much progress. However, a new agreement came into effect in 2003 between the six original members to create a free trade area by 2010, with the newer members joining by 2015.

What Is The Association Of Southeast Asian Nations?
ASEAN Countries Here you can see the countries that participate in the Association of South East Asian countries.

What Is The Asia-Pacific Economic Cooperation?
The Asia-Pacific Economic Cooperation (APEC) has 21 members including the United States, Japan, and China wants to increase multilateral cooperation member states account for 55% of world’s GNP, and 49% of world trade Another grouping, the Asian Pacific Economic Cooperation, or APEC, was founded in 1990 with 21 members including the U.S., Japan, and China. The goal of this group is to increase multilateral cooperation between the countries. If this group eventually becomes a common market, it will probably be the world’s largest!

What Is The Asia-Pacific Economic Cooperation?
APEC Members In this map, you can see the countries that comprise APEC.

What Is The Status Of Economic Integration In Africa?
Many countries are members of more than one of the nine blocs in the region But, since many countries support the use of trade barriers to protect their economies from foreign competition, meaningful progress is slow The East African Community (EAC) was re-launched in 2001, however so far, the effort appears futile Does Africa participate in regional economic integration? It has, there are actually nine trade blocs on the continent, but they are trade blocs in name only.

What Does Economic Integration Mean For Managers?
Regional economic integration opens new markets allows firms to realize cost economies by centralizing production in those locations where the mix of factor costs and skills is optimal But within each grouping, the business environment becomes competitive there is a risk of being shut out of the single market by the creation of a “trade fortress” What are the implications of regional economic integration for managers? Well, we’ve talked a bit about some of the implications already. At the moment, firms need to focus on how the EU and NAFTA affect them. What opportunities does economic integration bring for firms? A main opportunity is access to new markets. In addition, firms have the potential to make significant cost savings thanks to the free movement of goods across borders, the harmonization of product standards, and the simplification of tax regimes. Does economic integration pose any threats for firms? Unfortunately, the answer is yes.! The business environment becomes more competitive, and for non-EU and non NAFTA firms, challenges come from the likely long-term improvements in the competitive positions of many European and North American companies. There’s also a risk that firms may be shut out of a single market like the EU by the creation of a trade fortress where the EU establishes very high barriers to non-EU firms. In addition, firms may find that their choice of strategy is limited as the EU continues to increase its role in competition policy and intervenes to impose conditions on companies proposing mergers and acquisitions.

Review Question All barriers to the free flow of goods and
services between member countries are removed, and a common policy toward nonmembers is established in a a) Free trade area b) Customs union c) Common market d) Economic union Now, let’s see how well you understand the material in this chapter. I’ll ask you a few questions. See if you can get them right. Ready? All barriers to the free flow of goods and services between member countries are removed, and a common policy toward nonmembers is established in a a) Free trade area b) Customs union c) Common market d) Economic union The correct answer is b.

Review Question NAFTA is an example of a(n) a) Free trade area
b) Customs union c) Common market d) Economic union NAFTA is an example of a(n) a) Free trade area b) Customs union c) Common market d) Economic union The correct answer is a.

Review Question When higher cost suppliers within the free trade
area replace lower cost external suppliers a) The bloc as a whole benefits b) There is trade creation c) There is trade diversion d) External suppliers benefit When higher cost suppliers within the free trade area replace lower cost external suppliers a) The bloc as a whole benefits b) There is trade creation c) There is trade diversion d) External suppliers benefit The answer is c.

Review Question _______ is the ultimate decision making body of
the European Union. a) Council of the European Union b) European Parliament c) Court of Justice d) European Commission _______ is the ultimate decision making body of the European Union. a) Council of the European Union b) European Parliament c) Court of Justice d) European Commission The answer is a.

Review Question _______ is responsible for proposing EU legislation.
a) Council of the European Union b) European Parliament c) Court of Justice d) European Commission _______ is responsible for proposing EU legislation. a) Council of the European Union b) European Parliament c) Court of Justice d) European Commission The answer is d.

Review Question Which of the following is not true of NAFTA?
a) It created a free trade area of nearly 800 million people b) It created the background for increased political stability in Mexico c) Several other Latin American countries have indicated their desire to eventually join NAFTA d) Its participants are the United States, Canada, and Mexico Which of the following is not true of NAFTA? a) It created a free trade area of nearly 800 million people b) It created the background for increased political stability in Mexico c) Several other Latin American countries have indicated their desire to eventually join NAFTA d) Its participants are the United States, Canada, and Mexico The answer is a.

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