Free Trade Agreement: NAFTA and Protecting Markets
“A free trade agreement is just a deal between countries that allows foods or goods (things like toys, computers and toys) to come into each country without any additional tariffs. NAFTA stands for North American Free Trade Agreement and it is a pact signed by Canada, the USA and Mexico. It basically removes tariffs in North America ” explained Grandma.
“So, there are no extra charges or duties in North America?” asked Mira
“Not exactly. You see, some parts of our economy need a bit of help. Either they employ a lot of people, or they work under different conditions. Since the government wants to “protect” these workers, regions or industries from competition, it means that even within a free trade agreement, you can have tariffs on certain things. Canada likes to protect its dairy farmers and the United States likes to protect its wood industry.”
“Is NAFTA the only free trade agreement Canada has?” asked Mira.
“No. Not at all. Canada has free trade agreements with over 40 countries. We trade things worth more than 1 trillion dollars ever year. That’s a lot of things being traded between Canada and other countries. In fact, not too many people know this, but worldwide Canada trades mostly in cars, oil and machines.”
“Now, some free trade agreements, like those in Europe, allow people to move freely between countries. NAFTA does not. It only allows some goods to move freely.”
“What other types of agreements are there?” asked Teyus.