Differences between NAFTA and the EU
What exactly is the EU and NAFTA, and why were they established in the first place? What distinguishes the two? Come take a look at our article and find out.
Abbreviations can make life easier, but only if you know what they mean. What is USMCA, and what are the benefits of USMCA for Mexico? What is the difference between NAFTA and the EU? No idea? Here are some answers.
What Is (Was) NAFTA?
NAFTA stands for the North American Free Trade Agreement. It was implemented in 1994 to encourage trade between the U.S., Mexico, and Canada.
In 2018, the United States-Mexico-Canada Agreement (USMCA) was signed. It went into full force on July 1st, 2020, and replaced NAFTA.
NAFTA's goal was to reduce or eliminate tariffs on imports and exports between the three participating countries. The result was a huge free-trade zone.
Another key part of NAFTA was establishing high common standards in workplace safety, labor rights, and environmental protection. This was to prevent companies, such as manufacturing companies, from relocating to other countries to benefit from lower wages or less strict regulations.
Despite its successes, NAFTA was also a controversial agreement. It improved the U.S. economy by some measures such as trade growth and investment, but it also hurt the economy concerning employment and balance of trade.
What Is the EU?
The EU stands for the European Union. It's a political and economic union of 27 European countries with an estimated total population of about 447 million.
The key to the economic union is the internal single market, established through a standardized legal system that applies to all member states in matters where the states have agreed to act as one.
EU policies aim to ensure the free movement of people, goods, services, and capital within the internal market and to harmonize policies on trade, agriculture, fisheries, and regional development, among other things.
What’s the Difference?
There are many differences in the details of the respective agreements, but the biggest difference is that NAFTA is only a free trade agreement. That means its principal goal is to enable all three participating countries to trade more efficiently. There are no common political bodies, such as a parliament, and no common laws.
The EU, on the other hand, is not only an economic union but also a political union. That means there is a European parliament that establishes laws for the entire union. There are common policies that go far beyond just economics. There is a common foreign policy, and the EU often acts as one single union in international affairs.
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