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Impact of NAFTA agreement on the US Economy - Research Paper Example

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The paper aims at exploring how the trade agreement called NAFTA that the US has entered into with Mexico and Canada has impacted on the domestic industries and the US economy at large. The paper would also explore how the devaluation of the US Dollar against the Chinese Yuan can bring respite to the US manufacturing industries                     …
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Impact of NAFTA agreement on the US Economy
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Download file to see previous pages Each country is endowed with certain natural resources such as minerals, water, land, fossil fuels, and essential raw materials and accordingly their strength lies in manufacturing those finished goods where such resources are necessary. Obviously, such resource pool will put certain countries an advantage over others.
The technological superiority of one country over other in a particular product will facilitate production of better quality goods at lower cost and that superiority puts one country ahead of others in a particular good. If the US produces Boeing aircraft and fighters or other sophisticated warheads then it is because of the technological superiority that the US exerts over others in this field.
Trades between the nations are also impacted by the subsidies provided to domestic producers or tariffs imposed on the imported goods. Subsidies will artificially reduce the cost of domestic producers and tariffs will increase the cost of imports thus jeopardizing the international trade. For a free international trade, it is essential that such tax barriers do not exist between the nations.
Douma & Schreuder (2008) argue that the country that shows highest productivity levels over others in a particular good will be considered to have an absolute advantage in producing that good. It is a fact that the US has an absolute advantage in producing grains as it needs fewer real resources relative to the most of the countries in the world. The availability of huge agricultural land and the use of machines are the major reasons for having an absolute advantage in agriculture. The country uses minimal labor per unit area of agricultural land increasing the productivity levels manifold. ...Download file to see next pagesRead More
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