These occur when one country imposes trade restrictions and no other country reciprocates. A country can also unilaterally ease trade restrictions, but this rarely happens. This would put the country at a competitive disadvantage. The United States and other developed countries are only doing this as a kind of foreign aid to help emerging economies strengthen strategic industries that are too small to pose a threat. The North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of Canada, Mexico and the United States that creates a trilateral trading bloc in North America. The Agreement entered into force on 1 January 1994. It replaced the Canada-U.S. Free Trade Agreement between the U.S. and Canada. International trade not only leads to greater efficiency, but also allows countries to participate in a global economy, the resulting in opportunities for foreign direct investment (FDI).
Theoretically, economies can therefore grow more efficiently and become competitive economic participants more easily. According to its preamble, its objective is “the substantial reduction of tariffs and other barriers to trade and the elimination of preferences on a mutually beneficial basis”. . . .