NAFTA Agreement vs European Union: comparison between agreements

Author: Pierre Varasi
Translated by Ilaria Oberti
04/04/2015

After years of work and projects and with the previous EEC, European Economic Community, on February 7th 1992 with the Treaty of Maastricht the European Union is official. The first ideas of such an union go back to 1800. Much more decisive for the success of this union was the Ventotene Manifesto, written in the ’40s by Italian Altiero Spinelli, Ernesto Rossi and Eugenio Colorni. Nowadays, EU is composed by 28 countries and it is even spreading: Turkey, Macedonia, Montenegro, Serbia and Albania have expressed the willing of joining the Union. The EU is the biggest free trade area, with a population around 503 million of inhabitants, and a GDP that represents more than 20% of the world GDP.

Even if in recent days it suffers from some economic and political issues, the EU is one of the most powerful union in the world; every single country of the Union, alone, would never have had the same political nor the same economic influence. Canada and United States were taking inspiration from EU when they decided also to sign an agreement between them called NAFTA (North American Free Trade Agreement). On January 1st 1994 also Mexico joined this agreement. Today this agreement is composed by 439 million of inhabitants, almost as EU, and has the biggest GDP of the world – about 17 billion of dollars every year. The big figures don’t assure no critics against NAFTA and many would like its end or at least a change.

Between the two agreements there are a lot of similarities as well as a lot of differences. In a long term period, probably the issue that has had the most of the consequences is the decision of not having a complete economic integration between Canada, United States and Mexico. This mean both no single currency and a limited collaboration and partnership in some industries and branches. For instance, in North America it doesn’t taken into consideration an integration in employment; on the contrary European workers can travel without any kind of problem and the market is only one.

This lack has led to an increment in migration, in particular from Mexico to United States but also a bigger American “fortification” with a bigger number of people working in the border security between the two countries. EU has done the exact opposite: first of all a dissolution of the borders and secondly it gives a big amount of money in form of investments to the countries with some difficulties when they are joining the Union. The investments helped Spain in ’90s, which had a drop in emigration and a growth in immigration.

Since NAFTA had been created, the North-American economic has been grown, but just the United States are having some profits: for instance, Mexico had to suppress its agricultural subsidy system while US could keep theirs. In 2008 the economic growth of Poland, member of EU since 2004, was 5% of GDP, while the Mexican growth was 3%. The main problem was the lack of investment that could have helped Mexico to grow. This issue led to a bigger spread between the GDP of the NAFTA’s members. In 1986 the spread was about $ 17.700 while in the 2004 reached $ 24.100. The same problem happened to the migration issue. In EU the intern migration diminished heavily, while in North America a reduction happened just in the late years – although it cannot be easily linked to the effects of the free trade area.

Nowadays EU cannot be seen as an absolute success, even though temporary difficulties can be easily be passed – keep in mind that the economic crisis of 2007 started in the US and spread over EU. EU and NAFTA are two different entities with different history and aims. Although it is natural thinking that NAFTA can take examples from the experience of EU and it could reach a complete economic integration, with a possibility in reaching and surpassing the economy of EU, having as result the solution of the internal problems and inequalities. In regard EU, decisions about a possible political collaboration will be made soon, which will lead EU as the first experiment in this field – EU was the first attempt in regarding the economic collaboration.

SOURCES :

Caution: Nafta at Work (Massey, 2008)
Advantages Disadvantages And Comparisons EU And NAFTA (lawteacher.net)
www.naftanow.org