Image of a flag superimposed with the flags of the United States, Mexico, and Canada.

Globalization can be analyzed by examining the patterns of trade over time. By examining such patterns, the impact of globalization can be seen. In this section, you will analyze the patterns of trade among three neighboring countries: Mexico, the United States, and Canada.

Image of orthographic map where Canada, United States, and Mexico are shaded.

These three countries, pictured on the map above, had been traditional trading partners, mainly out of geographic convenience. Free trade existed between Canada and the United States, while Mexico and the United States traded with several barriers. By 1989, all three countries were working toward a free trade agreement that would promote trade between all three countries by eliminating trade barriers such as licensing and tariffs.

The agreement was named the North American Free Trade Agreement, or NAFTA. Its purpose is to implement a free trade region and encourage the free movement of goods and services across the three borders.

The timeline below illustrates the progress of NAFTA.

→ Quick Thought: Based on the dates on the timeline, do you think the process of negotiating this trade agreement was an easy or difficult task?

NAFTA was entered into force on January 1, 1994. NAFTA has become the world’s largest free trade area, but there are also some drawbacks to this agreement. Read the table below.

The Pros and Cons of NAFTA
Pros	Cons
Links 450 million people More than $17 trillion in goods and services between the three countries Lower tariffs on farm products Access to Mexican oil at lower prices	Many companies moved to Mexico where employee wages are lower Some U.S. jobs lost Mexican farmers forced out of business by U.S. – subsidized farms Mexican farmers increased use of fertilizers as they tried to compete with U.S. farms, thus polluting the environment in Mexico

→ Quick Reflection: Do you believe the pros outweigh the cons or vice versa? What influenced your opinion?

The overall global opinion is that NAFTA is a successful positive model for other trade agreements because of the increase in goods and services across the borders, especially in the industries of agriculture, textiles, and automobiles.

Activity

Below is an excerpt from the preamble to NAFTA. Read the selected excerpts and rewrite them in your own terms.

Excerpts from the Preamble of North American Free Trade Agreement

The Government of Canada, the Government of the United Mexican States and the Government of the United States of America, resolved to:

STRENGTHEN the special bonds of friendship and cooperation among their nations;

CONTRIBUTE to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation;

CREATE an expanded and secure market for the goods and services produced in their territories;

REDUCE distortions to trade;

ESTABLISH clear and mutually advantageous rules governing their trade;

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STRENGTHEN the special bonds of friendship and cooperation among their nations

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All three nations will work together and maintain a strong friendship.
CREATE an expanded and secure market for the goods and services produced in their territories

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Increase the marketplace to sell goods and services within.
REDUCE distortions to trade

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Take away the barriers to trade.

Resource Summary

In this resource, you reviewed the concept of globalization and examined a few of its implications (communication, transportation, and trade). Through globalization, economies have grown closer and become more interdependent. The information you’ve acquired in this resource will help you as you progress through subsequent resources in this course.