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NAFTA

Definition

NAFTA (North American Free Trade Agreement) is a free trade agreement signed in 1994 between the United States, Canada, and Mexico. It aimed to eliminate barriers to trade among these three countries by reducing tariffs and promoting investment across borders.

Analogy

Think of NAFTA as a giant trading party where the United States, Canada, and Mexico all joined together. At this party, they decided to remove all barriers like entry fees or restrictions on what can be brought in. This allows people from these three countries to freely exchange goods without any obstacles.

Related terms

Globalization: The increasing interconnectedness of economies, cultures, and societies worldwide through various forms of exchanges.

Protectionism: Policies that seek to shield domestic industries from foreign competition through measures such as tariffs or import restrictions.

Comparative Advantage: The ability of a country to produce goods or services at a lower opportunity cost compared to other countries, leading to specialization and trade.