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pohnpei397 eNotes educator| Certified Educator

The acronym NAFTA stands for “North American Free Trade Agreement.”  NAFTA was created as part of a more general move on the part of the United States government towards reducing trade barriers and creating a worldwide regime in which trade occurs as freely as possible.

At least since the Great Depression, the United States government has generally held to the position that free trade around the globe is a good thing.  The government has promoted free trade even as this led to the rise of countries that could compete with the United States.  Government officials have typically believed that this is in the best interests of the United States.

Government officials believe this because this is the conventional wisdom among economists.  Economists believe that countries all have advantages in producing certain goods and/or services.  When countries all produce the goods for which they have advantages and trade those goods among themselves, everyone benefits.  Economists believe that this sort of a system allows more goods to be produced in the world as a whole than would be produced if countries did not trade. 

NAFTA was created as a way to encourage free trade.  It created a free trade zone between Mexico, the United States, and Canada.  By taking down trade barriers between these countries, it allowed (according to government officials and economists) there to be greater production in those countries.  This allowed the people of the three countries to enjoy a higher standard of living.

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