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North American European Free Trade Agreement

Talk has arisen of a North American free trade agreement. Such a treaty would supplant the current treaty that Mexico has with the European Union and take the place of treaties currently being negotiated between the USA and EU and between Canada and the EU. Canada, the United States, and Mexico have had their own free trade agreement for nearly twenty years. The argument goes that by negotiating a North American European free trade agreement the North American parties could offer seamless logistics and products with components from any or all of the three parties. A North American European free trade agreement, the argument goes would be more competitive than three separate treaties with Europe by nations that already are partners in a giant free trade zone. North America and Europe face increasing competition from Asia. See our articles, Russian Chinese Energy Agreement and BRICS Development Bank Problems. A rational response might well be a North American European Free Trade Agreement instead of separate agreements between each North American state and the EU.

NAFTA

According to the NaftaNow web site:

The North American Free Trade Agreement (NAFTA) is a comprehensive trade agreement that sets the rules of trade and investment between Canada, the United States, and Mexico. Since the agreement entered into force on January 1, 1994, NAFTA has systematically eliminated most tariff and non-tariff barriers to free trade and investment between the three NAFTA countries. It is a formal agreement that establishes clear rules for commercial activity between Canada, the United States, and Mexico. NAFTA is overseen by a number of institutions that ensure the proper interpretation and smooth implementation of the Agreement’s provisions.

US exports at the beginning of the decade were $248.2 billion to Canada and $163.3 billion to Mexico. These nations have been the top two purchasers of US exports. At the beginning of the decade exports within NAFTA amounted to a third of all US exports. Top exports include machinery, vehicle parts, electrical machinery, mineral fuel and oil, and plastics coming to well over $200 billion a year. The USA exports over $30 billion in agricultural products to its NAFTA partners every year.

The European Union

The European Union (EU) is both a political and economic union comprised of 27 member states. Unlike North America the EU nations give up a degree of sovereignty in return for membership in the trade zone.

EU and North America

The GDP of North American nations is around $18 trillion. That of the EU is just under $13 trillion in US dollars. The $31 trillion combined economies of North America and the EU amount to 43% of the world economy (world GDP is just under $71 trillion). The rationale for a combined North American European free trade agreement is clear. Create a free trade zone that includes nearly half of the world economy and stimulate business and economic growth on both sides of the Atlantic. If such a treaty comes to pass it could change international investment strategies for many investors.

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