European Union (EU) and North American free trade area (NAFTA) are economic integration blocs which influences to a great deal the global economic activities. European Union is much larger than NAFTA comprising of 15 member states and a population of about 370 million people. NAFTA is made up of 3 countries with a population of 400 million people and has a GDP of about $ 11 trillion while EU has a GDP of $ 9 trillion. The two trading blocs influence much of the global trade policies (Dominguez, 2007). This paper will evaluate the major similarities and differences of NAFTA and EU trading blocs.
European Union and NAFTA NAFTA, an acronym for North America free trade agreement is a trade agreement between the North America, Mexico and Canada. This trade agreement came into force in the year 1994. Its main agenda is to increase trade amongst the member states and to increase economic development in this region. It sought to reduce trade barriers by eliminating tariffs to encourage direct investment. However, NAFTA is not a form of customs union because all the three member countries impose different tariffs on nations not member to this agreement.
Also, the three member states are allowed to form other free trade agreements with different countries. Another significant feature of NAFTA members is that they still hold their own currencies and the mobility of people is not free. The main goal of NAFTA agreement is to enhance development while still retaining the supremacy and autonomy of the three member states. NAFTA agreement has no political orientation in it (Chen, n. d). The European Union on the other hand is an economic and political entity unlike the NAFTA which is only an economic entity.
The European Union is currently made up of 15 registered member states. European Union is a common market and all member countries impose or have same external tariffs unlike in NAFTA agreement. Also, all the countries associated with European Union use one currency known as the euro. Most of the decisions and policies such as environmental and agricultural policies are decided or formulated at European Union level although they affect all member states. European Union is more of a political union since the union has a parliament, a European commission, an executive justice and a court of justice.
The union also has a president with the presidency rotating among the presidents of the member countries. Borders of all member states are open and people move freely unlike in NAFTA agreement. While negotiating externally, European does so as one unit and no member country is allowed to negotiate individually. Integration and expansion are the major long term goals for European Union. The union also aims at drafting a constitution aimed at governing all the countries although so far this has not been successful (Dominguez, 2007). When it was founded, NAFTA aimed at increasing trade and ensuring development of its member states.
Currently, NAFTA is setting motion of regionalization a concept based on Europeanization. In my opinion, NAFTA is following in the steps of European Union towards a political integration although the process is expected to take longer time than that taken by the European Union. United States has been at the center stage advocating for integration while Mexico and Canada are partners that are fighting to maintain their autonomy and supremacy of their countries. Under the NAFTA today, most of the states’ policies especially in regard to environment are governed by the agreement.
The agreement is gaining more power than it was previously meant to and just like the EU is lobbying for a more centralized government. NAFTA is thus slowly moving towards becoming an economic and political integration (Chen, n. d). Reference: Chen, G. (n. d): A case for evolving NAFTA towards an EU-like structure. Retrieved on 20th July 2009 from, http://www. duke. edu/~gwc/NAFTA. htm. Dominguez, R. (2007): NAFTA: Will it ever have an EU profile? Retrieved on 20th July 2009 from, http://aei. pitt. edu/8181/01/Dominguez_NAFTA_WillitEver_long07. pdf.