Free Trade Issue

Within the context of international regional economic integration, there are five levels(1) freetrade area, (2) customs union, (3) common market, (4) economic union, and (5) political union (Grosse, & Kujawa, 1988). Each successive level involves greater integration. At the lowest level of integration, the freetrade area, tariffs are eliminated on the trade between the member countries. At the next level, the customs union, common external tariffs are applied to all trade between the member countries and non member countries. The third level, the common market, moves one step further along, and permits the free flow of the factors of production among member countries. At the fourth level, economic union, monetary and fiscal harmonization among member countries is added to the common market system. The final level, political union, involves the creation of a single government over all member

1 2countries, and the loss of national identity for the individual member states of the union. Only the first levelthe free trade areais considered in this research with respect to petential free trade between the United States and the five Latin American countries.

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gescale unemployment as a result of the implementation of the FTA, and an eventual dilution of Canadian sovereignty. During the first year subsequent to the implementation of the FTA, the Canadian opposition parties have had ample opportunity to say "I told you so," as (1) American owners of many Canadian production facilities either closed them down, or reduced their levels of operation, and as (2) Canadian firms moved to the United States to gain access to lower American labor costs. While such incidents have been far more numerous than the Mulroney Government had predicted, they have not been pervasive in the Canadian economy. Both the American and the Canadian economies were in the fifth year of a growth cycle when the FTA was implemented. 8Thus, continued growth in the first year of implementation cannot be realistically attributed to the FTA. The potential longterm effects of the FTA transcend the relatively narrow confines of trade. Economic, social, and political changes in each of the FTA countries are potentially significant as a result of the agreement. Directly related to trade, the FTA is, over the longterm, expected to lead to an increase in the Canadian gross national product (GNP) of fivepercent
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Approximate Word count = 3830
Approximate Pages = 15 (250 words per page)

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