NAFTA vs EU

The role of trade blocs is clearly defined. They are created to increase the wealth and standard of living for the citizen in its member countries and they also provide more availability of goods and services. The NAFTA (North American Free Trade Agreement) is created by the governments of the United States, Canada and Mexico. On 1 January the member states signed the agreement and since than the NAFTA is one of the biggest free trade blocs in the world. It is well developed, because the agreement is not only based on trade issues but also on labour, environment, investment, intellectual property and service issues. It has circa 380 million inhabitants and 7, 9% of the world trade is made by the NAFTA, whereas the EU (European Union) makes 22, 8% of the world trade. The EU has 27 member states, which are located in whole Europe and thus it has 489 million inhabitants.

The last few years have shown that the European Union is much more successful than the NAFTA. Even the fact that the NAFTA is dominated by one of the strongest economies, the USA, it can not beat the European Union. For example, since the implementation of the bloc Canada has been have an average growth in its GDP of 3%, whereas a lot of countries such as Poland, Ireland and Czech Republic had an average rate of 5 %. There are several reasons for it.

The most significant one is that the NAFTA does not have a common external Tariff. The three countries are still divided in regulations in economic and social issues, so there are still a lot of barriers, which have to be entered for businesses and also for individuals. For example, the three countries do not have the same currency and Mexican inhabitants can not go to the USA without passing several bureaucracy barriers. This complicates not only the individual lives also businesses have to spend time in organizing bureaucracy issue and time costs money. The EU is more combined, it has the same currency and people can live in the member countries as long as they want to and also work as much as the want to without passing any criterions, they just have to be European.

Furthermore the NAFTA includes three countries and the EU includes 27 and more countries will be participating. Due to the fact of same regulations and currency the inhabitants of the EU feel more comfortable to trade with each other than they did before. That’s why most of its trade is done within the member countries. So only the fact that there are more countries to trade with is already an advantage that Europe has compared to America. Every country can concentrate on specific productions and services, so that everybody can do what they can do the best and out of it the Union can work more efficiently in costs and labour.

Another reason is the location and the history of Europe. Capitalism, which can take place the best in a democracy, is the foundation of a strong economy and strong economies are fundamental for trade. Everything starts with the industrial revolution, which took place in Europe in countries such as Great Britain, France, Italy, Germany and the Scandinavian countries. All these countries made the foundation for today’s developments in economic and political issues. After, the USA became a strong economy, than Japan and now china, but the core is Europe. Even more than hundred years developments could not stop the strong power, which Europe countries have and important for the EU is, that all these countries are members.

An advantage is also the location of the European Union. It is next to Asia and Russia as well really closed to Africa and transfers to America are well developed too. In contrast North America is closed to South America and East Asia. Thus the ways for trading products and services are much longer than for the EU. Additional due to history the members of the EU have special and closed relationships to their old colonies in Africa and South America, which made trade much easier.

The NAFTA has a lot of problems with itself. The economic, political and cultural gab between Mexico and USA is rarely high and was not adapted before the Agreement. That’s why the American people have the feeling, that there are more illegal immigrants, trade deficits instead of over pluses and loss of hundreds thousand of jobs, as before. On the other hand Canada and Mexico are highly dominated by the USA, which declines their trade freedom. Thus the relationships within this bloc are complicated and tight, and this is not a good base for businesses and trade. Nevertheless NAFTA is one of the most powerful blocs in the world, but it has potential for improvements. However the NAFTA can not obtain the same level as the EU, caused to the lacks in history, location and developed countries.