This assignment discusses the discriminatory trade liberalization under the North American Free Trade Agreement (NAFTA). The underlying principle of the trade agreement is progressive trade liberalization in all fields of economic activity. The NAFTA is a trilateral trade agreement between Canada, the United States, and Mexico. Economic areas under the NAFTA trade agreement also include those that are more prone to protectionist forces such as agriculture, financial services, and foreign direct investment. In aiming to promote progressive trade liberalization, the NAFTA contains rules designed to guard against discriminatory trade practices. An example is an exporter “dumping” cheap products in a foreign market.
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DISCRIMINATORY TRADE LIBERALIZATION AND THE HISTORY OF THE NAFTA
The signing of the NAFTA trade agreement was on December 17, 1992, and came into effect on January 1, 1994. To a significant degree, NAFTA extended the Free Trade Agreement (FTA) between the United States and Canada. Therefore, the countries’ trade liberalization included provisions concerning foreign investment and services. NAFTA also extends to include a provision dealing with intellectual property. There are substantial differences between NAFTA members. The United States is a significant trading partner of both Canada and Mexico. However, Canada and Mexico are almost insignificant trading partners with each other. Some consider this as discriminatory trade practices because Canada and the United States are at a similar stage of economic development. As for Mexico, many consider it a developing nation.
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SAFEGUARDS AND AGRICULTURE UNDER THE NAFTA
The NAFTA trade agreement limits safeguards to either suspending the further reduction of duty. Finally, under NAFTA 801(4), the member taking the emergency action must provide to the affected member “mutually agreed trade liberalizing compensation”. This will have substantially the same trade effects, or be the equivalent to the value of the duties. If the parties cannot agree on the compensation, the affected member is entitled to take tariff action unilaterally. Safeguards must avoid discriminatory trade practices for all countries that are substantial sources of imports. Agriculture provisions under NAFTA are some of the most complex. NAFTA members did not adopt a trilateral approach to negotiations but instead settled on a series of bilateral agreements.
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