Page 98 - Introduction to Business

72 PART 1 The Nature of Contemporary Business

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA). You will notice in Exhibit 2.7
that the United States’ top two trade partners are its neighbors, Canada and Mex-
ico. In 2001, U.S. trade with Canada was $384 billion, and with Mexico it was $235
billion. Historically, Canada has always been the United States’ largest trade part-
ner and Mexico has ranked either second or third (after Japan). With such close
trade linkages with its northern and southern neighbors, it made sense for the
United States to explore more formal trade linkages with its strategic neighbors. It
is always prudent to implement progressive economic (especially trade and invest-
ment) policies that enable your neighboring countries to grow and prosper along
with you. It is like living in a place where your neighbors are employed and are
enjoying an improved standard of living. You will feel safe, since everyone’s stan-
dard of living and quality of life is being enhanced, as opposed to having unem-
ployed neighbors who are likely to relieve you of your prized possessions!
NAFTA (see Exhibit 2.8) is a comprehensive trade agreement among Canada, the
United States, and Mexico that deals with issues ranging from phased reduction (and
finally elimination) of trade barriers to protection of workers’ rights and the environ-
ment (see Exhibit 2.8). NAFTA (www.nafta-sec-alena.org/DefaultSite/index.htm)
negotiations began in the early 1990s; the agreement was signed by the three

EXHIBIT 2.7
United States: Exports and Imports of Goods to and from Top Ten Trade
Partners (in billions of U.S. dollars)

Exports

1997 1998 1999 2000 2001

World total 688 680 691 772 731
Canada 150 154 163 175 164
Mexico 71 79 86 109 102
Japan 66 58 58 65 58
United Kingdom 36 39 39 41 41
Germany 25 27 27 29 30
South Korea 25 17 22 27 22
France 17 18 19 20 20
Netherlands 20 19 19 22 20
China (X. Hong Kong) 13 14 13 16 19
Singapore 18 16 16 17 18
Imports

1997 1998 1999 2000 2001

World total 899 845 1048 1238 1180
Canada 171 178 199 229 220
Mexico 87 96 110 135 133
Japan 124 125 134 150 130
China (X. Hong Kong) 66 75 87 106 109
Germany 44 51 56 60 61
United Kingdom 34 36 40 44 42
South Korea 24 25 32 41 37
France 21 25 27 30 31
Italy 20 22 23 26 25
Malaysia 19 20 22 26 23

Source: IMF, Direction of Trade Statistics Yearbook, 2002, pp. 480–482.
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