Regional Trade Agreements

A number of multilateral trade agreements have accelerated the pace of global integration. NAFTA has expanded trade between the United States, Canada, and Mexico. The General Agreement on Tariffs and Trade (GATT), which was ratified by more than 120 nations in 1994, has created the World Trade Organization to promote and protect free trade. In Europe, the expanding membership of the European Union is lowering barriers to trade within the region. In Asia, the expanding membership of ASEAN (Association of Southeast Asian Nations) is promoting closer economic cooperation and trade within the member southeast Asian nations.

The WTO and NAFTA

The World Trade Organization (WTO), previously known as GATT, is a 123-country organization whose objective is to promote trade among its members. These countries account for over 90 percent of world trade. There are about 20 countries from the industrialized nations of the West, including Japan, [Page 1351]and over 100 members or associates from the less developed countries. To achieve its aim, the WTO has over the years provided a forum where countries have met to negotiate on tariffs and trade. As a result of these forums or conferences, the tariff rates for tens of thousands of items have been reduced, and a high proportion of world trade has seen an easing of restrictions.

In 1988 the United States signed the North American Free Trade Agreement (NAFTA) with Canada, the scope of which was enlarged in 1993 to include Mexico. The United States, Canada, and Mexico promote economic growth via expanded trade and investment. All three governments acknowledge that free trade will help all countries to meet the economic challenges of the future. The gradual elimination of barriers to the flow of goods, services, and investment, coupled with strong intellectual property protection, will benefit all. Canada and Mexico rank first and third as the United States's most important trading partners (Japan ranks second).

The European Union

The European Union is composed of 27 independent sovereign countries, which are known as member states: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. The European Community (EC) was established by the Treaty of Rome, which came into force on January 1, 1958. A step-by-step reduction of internal customs duties on industrial goods resulted in their complete removal by July 1,1968. Simultaneously, the duties applied to imports from third countries were gradually aligned, and the common external tariff within the EC also came into force on July 1, 1968, and there was a target of removing all internal barriers to the movement of goods and services by 1992.

A common agricultural policy has been adopted and the removal of internal agricultural duties has been completed. The external customs duties for the majority of agricultural products, which are subject to EC regulations, were suspended and replaced by variable import levies designed to bring the price of products imported from third countries in line with those prevailing from inside the community. The community has made progress in abolishing restrictions on the movement of capital, in the alignment of taxes, and in developing a community policy on competition, and restrictive practices such as price fixing, and company mergers. In addition, EC companies have received freedom for workers from member countries to obtain employment anywhere in the community and freedom for firms to establish and operate anywhere in the community.

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