Introduction
Frankel, Stein, & Wei (1997) define trading blocs as the groups of nations forming a customs union or an economic union. Globalization is the state of increased interdependence and unification of national economies across the world. This is achieved through the reduction of roadblocks to international trade such as export fees, import quotas, and tariffs. Trading blocs are very important in catalyzing the process of reducing these roadblocks to international trade (Frankel, Stein, & Wei, 1997). Countries across the world have formed a number of regional trading blocs which play a significant role in world trade and economy. Therefore, throughout this discussion, the effects of trading blocs on globalization, especially the North American Free Trade Agreement (NAFTA) and Central European Free Trade Agreement (CEFTA) will be considered in detail.
North American Free Trade Agreement (NAFTA)
History and Formation of NAFTA
According to Lim (2006), the North American Free Trade Agreement (NAFTA) is known as the agreement that was signed by the United States, Canada, and Mexico which creates a trilateral trading bloc within North America. NAFTA implementation started on January 1, 1994. In 2008, all quantitative restrictions and duties were eliminated (Hampson & Heinbecker, 2010). NAFTA formed the largest free trade zone in the world which links millions of individuals producing a lot of goods and services. This trade bloc has set up a strong foundation that is meant for future growth. It has become a very good example of the positive consequences of trade liberalization. The concept of enhancing economic growth by the removal of barriers for easier movement of commodities and services between Canada, the United States, and Mexico, had existed for a number of years before NAFTA was born.
The Role of Canada, the U.S., and Mexico in Globalization
Canada and the United States have been found to have the largest bilateral trading association in the world (Lim 2006). The United States exports a lot of goods to Canada and receives a lot of merchandise from Canada. Some barriers such as tariffs which affected the agricultural trade between Canada and the United States were all removed in 1998. Canada provides the largest market for the United States’ agricultural commodities. Mexico exports most of its manufactured commodities to Canada and the United States which accounts for about 90 percent of the exports. Export jobs in Mexico account for over 20 percent and individuals from Canada and the United States can be employed (Hampson & Heinbecker, 2010). The three countries, therefore, actively participate in promoting globalization.
Impacts of NAFTA on the Governments of Canada, the U.S., and Mexico
Globalization has been found to have wide-ranging effects on political development based on the decreased importance of the Government and State. According to Frankel, Stein, & Wei (1997), due to the creation of supra-state and sub-state institutions like the WTO, the International Criminal Court, or the EU, the state loses policy-making power and therefore sovereignty. Globalization can also lead to a high trade imbalance which reduces the governing power of a country (Frankel, Stein, & Wei 1997).
Economic Impacts of NAFTA on Canada, the U.S., and Mexico
The economic impacts of NAFTA on Canada, the United States, and Mexico are usually considered as its effects on trade and labor markets (Lim 2006). NAFTA played a significant role in the elimination of various tariffs on commodities traded among Mexico, the United States, and Canada which has promoted the generation of a great deal of income for the economic benefit of the three countries. The biggest economic impact of NAFTA on the trade between the United States and Canada is to promote agricultural flows. Many economists assert that NAFTA has positively impacted on the United States labor market. NAFTA has negatively impacted on the farm prospects of Mexico by allowing for competition with the heavily-subsidized farm industry of the United States (Lim 2006).
Impacts of NAFTA on the Consumer
The consumer of goods and services is both negatively and positively affected by NAFTA. The positive effects include the availability of goods and services which results in reduced prices. A variety of goods and services can be accessible by consumers at lower market prices and therefore this leads to better standards of living (Lim 2006). This is possible because NAFTA facilitates globalization by ensuring that barriers to international trade such as export fees, import quotas, and tariffs are eliminated. Consumers can be exposed to infections and poisoning if the products in the market are contaminated. Interactions of many people across the world can increase the possibility of disease transmission (Lim 2006).
Central European Free Trade Agreement (CEFTA)
History and Formation of CEFTA
According to Ross (2002), Central European Free Trade Agreement (CEFTA) is defined as an agreement that was originally signed by Poland, Hungary, Slovakia, and the Czech Republic in 1992 and which became effective from the second half of 1994. Later on, Slovenia joined CEFTA in 1996 which was followed by Romania in 1997, and finally Bulgaria in 1999. It is generally known as a trade agreement that was made between the non-EU nations in South-East and Central Europe. Moreover, Latvia, Lithuania, Ukraine, and Macedonia have announced their willingness to join CEFTA. The main purpose of this agreement is to provide for the set up of a free trade zone for industrial commodities and reduction of some roadblocks to trade in agricultural products especially foods (Ross, 2002).
Role of CEFTA Membership in Globalization
The members of CEFTA have created favorable conditions that are necessary for setting up a regional investment market; trade liberalization; and overcoming roadblocks to trade as they focus particularly on market surveillance and non-tariff roadblocks. CEFTA has therefore participated in expanding trade in commodities and services and promote investment through fair, predictable, and stable rules, elimination of barriers to trade between its members, and providing suitable security to intellectual property rights with respect to international standards (Ross, 2002).
Impact of CEFTA on the Countries’ Governments
The impact of CEFTA on a country’s government is attributed to fact that CEFTA facilitates globalization (Ross, 2002). Globalization has been found to have a variety of effects on political development based on the decreased importance of the Government and State. Due to the creation of institutions like the WTO, the International Criminal Court, or the EU, the state loses policy-making power and therefore sovereignty. Globalization can also lead to a high trade imbalance which reduces the governing power of a country (Frankel, Stein, & Wei 1997).
Economic Impacts of CEFTA on Its Members
The economic effects of CEFTA on its members can be seen from a perspective of enhancement of trade and labor market between the member countries. Since CEFTA has removed the barriers to trade between its members, there will be frequent export and import of commodities and services between many countries in Europe (Ross, 2002). Individual from different member countries can also get job opportunities internationally. The economy of most countries depends on export trade. Therefore, CEFTA facilitates the economic growth of its members because there will be a wide market both for goods and services as well as job opportunities (Ross, 2002).
Impacts of CEFTA on the Consumer
Like in the case with NAFTA, the consumer of goods and services is both negatively and positively affected by CEFTA. The positive effects include the availability of goods and services which results in reduced prices. A variety of goods and services can be accessible by consumers at reduced market prices and therefore this leads to better standards of living (Ross, 2002). This is possible because CEFTA facilitates globalization by eliminating the barriers to international trade such as export fees, import quotas, and tariffs. Consumers are physically exposed to poisoning and infections if the products in the market are contaminated. Global interaction of people can increase the chances of disease transmission.
Impacts of Globalization on Political and Economic Systems
Trade blocs have been found to facilitate globalization through eliminating various roadblocks to international trade. Globalization has been found to have both negative and positive impacts on political and economic systems on the countries that are involved in trade agreements such as NAFTA and CEFTA (Frankel, Stein, & Wei 1997). Globalization encourages the freedom of exchanging goods and services as well as the existence of a global labor market. This has been possible because of the advancement of communication due to computer technology. Countries across the world can have access to wide markets for their commodities and services. This will result to the generation of income from the exported goods and services as well as salaries and wages from the job market. However, due to increased competition in the labor market, individuals are experiencing decreased salaries and wages.
When large quantities of commodities are involved in export from different countries, market prices decrease which does not favor sellers. Globalization has been found to have wide-ranging effects on political development based on the decreased importance of the Government and State. Due to the creation of supra-state and sub-state institutions like the WTO, the International Criminal Court, or the EU, the state loses policy-making power and therefore sovereignty. Globalization can also lead to a high trade imbalance which reduces the governing power of a country (Frankel, Stein, & Wei 1997).