Target Corporation in Mexico and Canada: REI and International Trade
Regional Economic Integration
Countries like Canada and Mexico also participated in the process of regional economic integration through their membership in the North American Free Trade Agreement (NAFTA). In January 1, 1994, countries including Canada, the United States of America, and Mexico applied this free trade agreement. This agreement involves the commitment of Mexico to implement the form of trade and investment liberalization that it has guaranteed to the other members of NAFTA, which is the United States and Canada. This commitment of Mexico is also in accordance with the Canada-United States Free Trade Agreement (CUSFTA) that was signed in 1988 (Buckley et. al., 2000).
NAFTA, as a form of regional economic integration paved the way for the elimination of trade barriers like tariff and non-tariff impediments to trade. This provision of the agreement has been applied to member states like Canada and Mexico for more than ten years while some import-sensitive products have a 15-year period of transition. In accordance to the CUSFTA, the United States and Canada’s bilateral tariffs continued to be phased out since it was scheduled in January 1998. In relation to this, NAFTA also made it possible to extend the dispute settlement procedures that are embodied in the CUSFTA to Mexico. In addition, it also contains the precedent-setting rights, as well as the obligations that concerns services and investment. This trade agreement also gives due importance in addressing environmental issues especially the ones that are connected with business and trade operations. Moreover, NAFTA also tends to solve the unfinished business under the CUSFTA. In doing so, they are giving NAFTA members like Canada and Mexico the form of protection with trade-related matters such as: intellectual property rights and rules against misrepresentation to investment, as well as covering transportation services (Buckley et. al., 2000).
International Trade
International trade is greatly characterized by the exchange of goods and services among countries. However, the exchange of products among countries is not that easy because there are many things that have been considered like the regulatory policies of a country when it comes to economic trade. Being the case, trade agreements are essential in order to create boundaries on the kinds of regulations that member countries might implement to regulate their participation with international business. These trade agreements are contracts between countries that are consisted of general rules, general exceptions, narrow exceptions known as reservations, and dispute settlements (Condon et. al., 2003).
At first, Canada and Mexico were reluctant to actively participate in the international market especially in establishing a trade agreement with the United States because they believe that the United States will just impose policies that will dominate the agreement. Nevertheless, Canada and Mexico changed their decisions due to the fact that they can no longer ignore their countries’ decreasing productivity and declining trade position in Europe. As a result, these countries opted to enter into a free trade agreement with the United States. Canada is the first one that entered an agreement with the United States through the CUSFTA and then, Mexico followed when the NAFTA was created.
International Trade Theory
The Economic Integration Theory was implemented in Canada and Mexico with regards to their participation in the free trade agreement with the United States. This theory perceives that since both the United States and Canada are the larger and wealthier countries with open economies, they should expect marginal adjustments when it comes to dealing trade with Mexico. On the other hand, since Mexico is the smaller, poorer, and more highly protected country, it should expect more sweeping and costly adjustment in the short term. However, Mexico should put in mind that there would be dynamic gains in the medium and long term periods. In this kind of situation, the more reluctant country should be the one that will lose more, which in this case are the United States and Canada. Nevertheless, during the debate before the establishment of NAFTA, the Mexicans are more worried of entering in this free trade agreement while the domestic feedback in the two countries on the trade collaboration was seen in a positive light (Wise, 1998).
Effects of the Political Economy of Trade
Most economic analyst stated that economic growth has been observable in Canada and Mexico since the implementation of NAFTA. This assertion is based on the increasing GDP growth of these two countries after the implementation of the provisions that are included in the trade agreement. On the part of Mexico, trade liberalization with the United States has brought positive results to Mexican business interest, as well as to regular Mexican citizens. In the same manner, Canada also experienced positive growth as it became the leading exporter of goods to the United States. Canadian employment has also experienced steady gains in the recent years. Moreover, Canada’s bilateral agricultural trade with the United States also flourished because of this trade agreement (Teslik, 2008). In this sense, it is quite observable that international trade especially in participating in regional economic integration has been very advantageous for Canada and Mexico
In a world that is currently experiencing the phenomenon of globalization, different countries around the globe are becoming more interdependent. In relation to this, the principle of international trade has become more applicable than ever. Various countries must work and collaborate with each other in order to keep abreast with the flow of changes that is happening in the world. As a result, greater cooperation is seen among countries like Canada and Mexico when they participated in a Regional Economic Integration (REI) agreement that tends to establish greater economic relationship among countries, as well as foster easier trade among nations.
References
Buckley, P.J., Clegg, J., Forsans, N., & Reily, K. (2000). Assessing NAFTA’s Impact on the
Strategies of Multinational Firms in Canada: A First Econometric Investigation.
Retrieved March 26, 2009, from http://129.11.89.221/MKB/KevinReilly/cannfta.pdf.
Condon, B.J., Sadka, J.C., & Sinha, T. (2003). Insurance Regulation in North America:
Integrating American, Canadian, and Mexican Markets. United States:
Kluwer Law International.
Teslik, L.H. (2008). NAFTA’s Economic Impact. Retrieved March 26, 2008, from
http://www.cfr.org/publication/15790/.
Wise, C. (1998). The Post-NAFTA Political Economy: Mexico and the Western Hemisphere.
United States: Penn State Press.
