Chapter 8 The Export-Import Sector A Summing Up: C + I + G + XnWorld Trade Agreements and Free Trade ZonesNAFTA, The North American Free Trade AgreementThe European Union (EU)The World Trade Organization (WTO)Liberalization of TradeNondiscrimination: The Most-Favored-Nation PrincipleObjectionsSlide 9Chapter 8 The Export-Import SectorA Summing Up: C + I + G + Xn8-9Net exports = XnXn = Exports - ImportsWorld Trade Agreements and Free Trade Zones•The North American Free Trade Association (NAFTA)•The European Union (EU)•The General Agreement on Trade and Tariffs (GATT)•The World Trade Organization (WTO)8-11NAFTA, The North American Free Trade Agreement•NAFTA was ratified by Congress in 1993•NAFTA created a free trade area that includes Canada, the United States, and Mexico–Trade barriers in industrial goods were dismantled–Agreements on services, investment, intellectual property rights, agriculture, and strengthening of trades rules were included–There were also side agreements on labor adjustment provisions, protection of environment, and import surges8-12The European Union (EU)•This free trade association of 15 nations was formed in 1992–Freight was now able to move anywhere within the EU without checkpoint delays and paperwork–So-called quality codes were ended–Workers from any EU country could work in any other member country8-14The World Trade Organization (WTO)•The WTO was set up in 1995 as a successor to GATT•The WTO is based on three major principles–Liberalization of trade–Nondiscrimination – the most-favored-nation principle–No unfair encouragement of exports8-20Liberalization of Trade•Trade barriers, which were reduced under GATT, should continue to be reduced–Trade barriers have been falling within free trade zones such as NAFTA and the European Union 8-21Nondiscrimination:The Most-Favored-Nation Principle•Under the most-favored-nation principle, members of WTO must offer one member the same trade concessions as any other member.–This is a lot like when the teacher says that if you bring candy to class, you must bring some for everyone8-22Objections•Environmentalists argue that elitist trade and economics bodies make undemocratic decisions that undermine national sovereignty on environmental regulation•Unions charge that unfettered trade allows unfair competition from countries that lack labor standards8-25Objections•Human rights and student groups say the IMF and the World Bank prop up regimes that condone sweatshops and pursue policies that bail out foreign lenders at the expense of local