IGCSE Development Studies: Specimen Questions with Answers 21 - 22 of 98

Explanation

The Pros of NAFTA Are as Follows

• Free trade increases sales and profit for Mexico, Canada, and the U. S. A, thus strengthening their economies.
• Lack of tariffs has allowed Mexico to sell its goods in the USA and Canada at lower prices.
• This makes Mexican products more competitive in these markets and increases Mexico profits as it tries to develop its economy.
• Free trade is an opportunity for the US to provide financial help to Mexico by making jobs available in factories located there.

Explanation

Main aim of a free trade area is to reduce the trading barriers, mainly tariffs and quotas to promote free trade of goods and services among the member nations.

Benefits of Free Trade to Neighboring Countries Are

• Efficiency: Free trade area encourages competition by offering better quality of goods and services which are not expensive. It helps in increasing the overall efficiency of the country in comparison to its competitor.
• Specialization of countries: The countries will produce those goods and services at which they are most efficient to meet the competition as they will take less time in production of those goods and services at which it is specialized.
• No Monopoly: With the free trade monopolies are eliminated from the market as more players can enter the market because trade and tariffs quotas are eliminated.
• Lowered prices: When the competition at the global level increases the prices go down which allows consumer to enjoy increased purchasing power
• Increased variety: Consumers will have an increased access to different products that are inexpensive through free trade.