Thursday, August 2, 2012

EU VS NAFTA

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The European Union (EU) and the North American Free Trade Agreement (NAFTA) belong to two different types of regional economic integration groupings. NAFTA is a Free Trade Area, an agreement that eradicates or diminishes custom duties and non-tariff barriers amongst two or more countries while each country conserves their internal tariff policies with nations that are not part of the FTA. EU is a political union which implies that besides of not having trade barriers among the member countries, there is a complete political and economic integration.

NAFTA and EU had become two of the most known groups in the world. The European union is nowadays the most powerful political union in the globe. One of the main social factors that allows an economic group to be successful is a shared identity. Canada and United States had the advantage of sharing a “North American” identity. Mexico is most well known as a Latin country and its people identify themselves more as “latins” than North Americans. However, Mexico large relationship with the US helped to lessen the non-identity shock. Another reason that helped Mexicans to do not reject the Trade Agreement because the lack of identity with its neighbours was the conception of United States as the “land of opportunities”.

The European Union did not have strong identity problems because most of its members share a historical background. The Second World War was an important factor for Europeans willingness to join in order to overcome the difficult war consequences.

Geographic closeness in both NAFTA and EU has been a key element in the success of both groups. As we know, proximity eases the functioning of a common market. The European Union has the great strength of having a modern and useful transportation network and as a consequence transportation costs have decreased in a 50%.

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