The paper addresses important concerns of the European Union and the NAFTA, NAFTA’s functional structure. A brief introduction if NAFTA and EU confront one another.
Some would doubt that the formation of NAFTA was the American response to the European Single Act that formed the EU, which is made up of 27 countries. There is nothing to gain for both the blocs. However in some areas, “peaceful co-existence” and some form of “stricter ties” between the EU and NAFTA would prove to be beneficial for both.
The NAFTA and the European Union comprising of 27 countries comprise the biggest blocs in the world. The two trade blocs are also highly interdependent through foreign direct investment. In 2007, stocks of FDI in the NAFTA were 1.25 trillion euros while relevant figure of the NAFTA in the EU bloc was about 1.15 trillion euros. In 2008, the value of exports of goods and services from the EU to NAFTA region amounted to 450.2 billion euros. While the value of import of goods and services to the EU from NAFTA bloc amounted to 362.1 billion euros. The main objectives of my paper are:
1) To compare the level of integration of
* Free Trade Area: No tariff between member countries and external trade barriers remain and vary from country to country
* Custom Union: No tariff between member
* Common Market: No tariff between member countries and external trade barrier and free movement capital and labor within the common market
* Economic Union: Common market, single currency, common monetary and fiscal policy
2) To compare the impact of integration
Both the EU and the NAFTA integration regime have related hopes for economic changes.
The integration blocs are a group that agrees to do:
* Eliminate/remove/abolish (internal) trade barrier
* Organize external trade barriers to establish union
* Allowing capital to move freely
* Allowing labor to move freely
* Manage indirect tax policy
* Direct policies
* By introducing a common currency
* Coordinate macroeconomic policies
* Coordinate foreign and defense policies
In recent years, regional trade blocs in different forms have increased and expanded. The EU has expanded to include several East European countries. Each of NAFTA countries has negotiated mutual free trade agreements with several countries. There are a few literatures on the consequences of 1) a free trade agreement between a major trading country of a big trade bloc such as NAFTA with EU or 2) a common and comprehensive free trade agreement between two major trade blocs. The EU: Regional integration with centralized institutions
The European Union was formed as a political partnership consisting 27 European countries. The EU was created after WW2. The first steps were to adopt economic cooperation. The basic idea was to trade with one another becoming interdependent and eventually reduces conflict. The EU put a social order in place, consisting of the: 1) allowing labor to move freely, 2) common competition rules, 3) unified and fair working conditions, 4) mutual environment, 5) estimating technical standards, and 6) transferring payments to match local growth and expansion.
Concept of Regional Economic Integration
National economic integration states that the countries of a physical and topographical area form a type of partnership. Regional economic integration can be mistook as an area where free trade can happen, a customs union, or a market that is common etc. NAFTA is an example of a free trade area. NAFTA included the US with Canada and Mexico. According to the NAFTA agreement, US, Canada and Mexico would work together to remove blocks to trade, and create and allow the movement of products and services, by supporting impartial competition in the free trade area. The European Union has a significant feature; the euro currency.
The then 11 member states launched the euro currency on January 1st 1999. At the beginning phase of the euro currency, it was sanctioned for transactions that did not require cash. The Euro was approved for equity and debt trading, bank transactions, business-to-business and payments by cheque. Th