NAFTA, along with its two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC), is the largest trade agreement on Earth today. In 2006, total trade reached a staggering $1.4 trillion. In 1967, ASEAN's overall trade was worth $10 billion. Southeast Asia has enjoyed unparalleled and astonishing economic growth in the past three decades since the establishment of ASEAN. Trading blocs include: North American Free Trade Agreement (NAFTA), Central American Free Trade Agreement (CAFTA), Association of Southeast Asian Nations (ASEAN), European Union (EU), Mercado Comun del Sur (Mercosur), and Southern African Development Community (SADC). Trading blocs are relationships between countries, generally in the same region, to facilitate free trade agreements. Benefits, reduction of tariffs, and other trading privileges applied to one country will be applied to all countries with the most favored nation status. The most favored nation status within a free trade agreement creates a situation where all countries are treated equally. MOST FAVORED NATIONĪn important component of free trade agreements is the most favored nation status. The notion of consensus facilitates cooperation and, potentially, an agreement that is most beneficial to all involved countries. At the center of the WTO is its multilateral trading system that functions by seeking consensus between all member nations (over 150). Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. The WTO is the only international organization dealing with the global rules of trade between nations. The WTO became the official successor to the GATT. In 1995, during the Uruguay round of GATT negotiations, the World Trade Organization (WTO) was created. Despite numerous difficulties and differences between the involved countries, much was accomplished by GATT although portions were never fully ratified by all of the countries. The complete process is called “rounds ” There were eight rounds in the GATT treaty. The process of creating a free trade agreement followed a pattern of discussion, negotiation, and eventual ratification. In addition to creating a more liberal trade environment, it also had provisions and charters creating rules for employment, commodity agreements, restrictive business practices, international investments, and services. The General Agreement on Tariffs and Trade (GATT) was created shortly after World War II, between twenty-three countries, to facilitate and coordinate trade between the nations. HISTORYĪccording to the Congressional Budget Office, since the end of World War II there has been significant support, especially from the United States, to eliminate artificial trade barriers and to support a greater liberalization of international trade. Trading blocs are groups of countries that have reached a common agreement to lower trade barriers throughout the group (e.g., NAFTA, ASEAN, and the European Union). Free trade agreements are generally seen as having a positive impact on economic growth, especially for smaller countries in the agreement. Member countries belonging to the free-trade area trade freely with each other while maintaining trade barriers and tariffs for non-member countries. Free trade agreements are created to lower trade barriers and to stimulate trade between member countries. Sovereign nations join together, usually on a regional scale, to create free trade agreements.
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