The Impact of NAFTA and ASEAN on Globalization - Research Paper Example

This paper discusses the impact of two of the known trading blocs, the North American Free Trade Agreement (NAFTA) and Association of Southeast Asian Nations (ASEAN) on globalization. NAFTA and Globalization NAFTA includes Mexico, Canada, and the United States. It is the biggest free trade zone in the world in terms of gross domestic product (GDP). In 1992, Mexican President Salinas, Canadian Prime Minister Brian Mulroney, and U.S President George Bush ratified the treaty. It was immediately implemented on the 1st of January 1994 (Hing, 2010).

The idea of NAFTA is to encourage economic progress by facilitating the flow of products and services between the member countries. Trade relations among the member countries have widened significantly since the completion of NAFTA (Lederman, Maloney & Serven, 2005), although scholars differ over the level to which this growth is an immediate outcome of the agreement. As shown in the report of the U.S Trade Representative (USTR), the primary representative of the United States in foreign trade and an important motivator of free trade agreements, the general trade value within North America has substantially increased since the initiation of the accord.

Regional business investment in the United States, still according to USTR, increased 117% in 15 years, from 1993 to 2007, in comparison to a 45% increase in the previous 14 years (Teslik, 2009, para 2). Trade with the associates of NAFTA currently comprises at least 80% of Mexican and Canadian trade, as well as of U.S trade. As stated by Gary Clyde Hufbauer and Jeffrey Schott (Teslik, 2009, para 3), “It has worked. North American firms are now more efficient and productive. They have restructured to take advantage of economies of scale in production and intra-industry specialization.” C. Parr Rosson III and associates emphasize that the notion of trade blocs is quite fresh in North America, yet claims that comparable agreements in other parts of the world have demonstrated steady gains when analyzed from a long-term point of view.

The authors identify various types of ‘preferential trading arrangements’ (Teslik, 2009, para 4), from restricted economic and customs unions to more free trade agreements such as NAFTA, which have been thriving in Europe. The paper, mentioned in the article of Teslik (2009), stresses that preferential trading agreements can in fact make trade temporary and can bring about disorders in the labor market that are quite unfavorable to a number of laborers, yet can be assumed to have important enduring gains as well.

Representatives of the three members of NAFTA have suggested an eagerness and/or plan to broaden NAFTA. This move would be both logical economics and wise foreign policy. The broadening of NAFTA membership into a free trade bloc in the Western hemisphere would prevent the detrimental repercussions of NAFTA and improve the ability of trade growth to encourage economic progress in the region (Caulfield, 2009). At present, there are four settings for enlarging NAFTA (Bernal, 1994, 30): (1) complete accession of other nations through a section in the current NAFTA accord; (2) employing a ‘hub and spoke’ system to add more trading allies to the United States; (3) Mexico or Canada separately, integrating several lesser regional trading unions into NAFTA; or (4) slowly expanding the trading rights of NAFTA to lesser nations without