Free Trade Among Developed Economies - Research Paper Example

The question then remains, should these be pursued by more economically developed nations? An example of this would be the North American Free Trade Agreement otherwise known as NAFTA which included Mexico, Canada and the United States in a limited free trade agreement. Unfortunately, this agreement has seen tariff wars occur, in some circumstances causing large deficits. According to one working paper from the California Western School of Law, published 2005. “In response to U.S. restrictions on Mexican sugar, President Vicente Fox placed a 20% tax on all soft-drinks not sweetened with Mexican sugar.

The “sugar tax” followed shortly after the DSB’s determination in the HFCS case, in which the Body held that Mexico failed to prove HFCS imports were threatening the Mexican sugar industry so as to warrant the imposition of antidumping duties. As a result of the sugar tax, the United States filed another complaint with the DSB” (Vacek-Aranda, 2005). With the increased taxation and import tariffs being bandied at this time it would seem to nullify the idea of free trade. However, once these disagreements are worked out there is a substantial benefit to be had for the economies of all involved nations.

To understand better why free trade is a necessary aspect of international trade among developed nations we should review what a developed nation is. A developed nation is simply a more economically developed country. This term is obviously ambiguous, however, can apply readily to those nations classified as first world nations. Some of those more economically developed countries or MEDC, would be Great Britain, Germany, Brazil, United States, Spain, Denmark and similar. According to a policy brief from International Institute for Applied Systems Analysis dated 2008, “The scenarios show that investment in education pays off in terms of higher long-term economic growth” ("Economic growth in developing countries: Education proves key," 2008).

This means only that nations with a more solid educational system and opportunities are more likely to be higher developed economic powers. Some arguments against the implementation of free trade agreements do so based on the non-members losses or reductions in ability to trade. However, the argument must be made that the implementation of a free trade agreement is a positive benefit in most cases. Arvind Panagariya et.al. outlines; “clearly, the initial equilibrium matters since that is crucial to the determination of the absolute level of consumers’ surplus relative to producers’ surplus” (Panagariya & Duttagupta, 2000).

Simply put the importance of an equal footing is initially necessary when looking at setting up a free trade agreement. The effects on surrounding nations that are not at the same stage of economic development are important to note as well. Primarily the argument can be made that pollution in underdeveloped nations will likely increase. An article in American Economic Review dated 1998 says, “Under the pollution haven hypothesis, poor countries get dirtier with trade, whereas rich countries get cleaner” (Antweiler, Copeland, & Taylor, Sept, 1998).

While this can be a detriment globally over time it should be noted that once a