NAFTA Mexico and the United States along with Canada have entered into a trilateral free trade agreement called the North American Free Trade Agreement otherwise known as NAFTA. NAFTA has got to be the largest trading agreement in history; the agreement creates a single market of 370 million consumers. The people of NAFTA talk about potential gains from increased free trade between Mexico and the U.S. as the two countries remove tariffs, other trade barriers and restrictions on investment so that businesses would have access for goods, service and investment. They argue that the U.S. stands to gain from the agreement as Mexico offers trade potential in a growing market, more investment opportunities, low cost labor, abundant natural resources, and geographical prospects and growing markets for American goods. On the other hand, outsiders argue that the agreement would further encourage American businesses to move their production facilities to Mexico in search of low cost labor so that the U.S. would lose a lot of jobs along with money. They also claim that the pollution in the environment, which is already bad to begin with, will be worsened by the agreement. These opposing arguments need to be sorted out so that the potential benefits and costs of the agreement can be identified. A free trade area is formed when countries remove tariffs and other barriers to trade among them while maintaining tariffs and other commercial policies against non-member nations. This selective trading arrangement would appear to be a movement toward freer trade and therefore, greater economic efficiency. The trade barriers among the member countries are removed while others remain. There are other potential benefits to members of a free trade area. Successful businesses within the trade agreement can take advantage of the economy as their market expands. Another source of benefits comes from increased competition.