North American Free Trade Agreement (NAFTA)

Definition

NAFTA is a trade agreement that was signed by the United States, Canada, and Mexico in 1994. It eliminated most tariffs on goods traded between these countries to encourage economic integration.

Analogy

Think of NAFTA as a group project where each member brings their unique skills to the table. Just like how in a group project you might have someone who's great at research, another person who's an expert presenter, and another who excels at writing - NAFTA allows each country to focus on what they're best at producing and then share those products with the others without any extra cost.

Related terms

Tariffs: These are taxes imposed on imported goods. They make foreign products more expensive which can help protect domestic industries from competition.

Economic Integration: This is when different economies become more interdependent through the removal of trade barriers like tariffs.

Free Trade: This is international trade left to its natural course without tariffs, quotas, or other restrictions.