.
The new regional agreements between the countries are in a sense a response to the increasing competition under a global economy, and a step to benefit from the process of globalization. "The new arrangements represent attempts to benefit from the gains from trade creation, economies of scale, product differentiation, and efficiency gains and policy coordination that arise from regional trade agreements- (Robson, 1993).
Historic Perspective.
In 1989 both United States and Canada signed the Canada-US Free Trade Agreement (CUSFTA), which latter became North American Free Trade Agreement (NAFTA). The NAFTA pact was put into effect on January 1, 1994 between the United States, Mexico and Canada. The leaders' of United States (George H.W. Bush), Canada (Brian Mulroney), and Mexico (Carlos Salinas de Gortari) signed this pact in December 1992. This pact calls for the gradual removal of tariffs and other trade barriers on most goods produced and sold in North America. It is important economically and politically for Mexico to be involved in this agreement. The channels of communication have been opened between countries. Mexico wants to build a stronger relationship, even alliance with the United States because of its strength and also the fact that they are neighbors. The Mexican peso has had problems. Mexico needs the stability that the US can offer. Culturally, Mexico is very different than the US. Some northern states of the country are similar and try to replicate trains of thought and ideals of its neighbor. These regions allow easier transitions of trade because of the similarities (Hill, 2000).
Regional Economic Alliance.
NAFTA became the world's second largest free trade zone; NAFTA also brought together 365 million consumers in Canada, Mexico and the United States. It began its building blocks in 1989 as an agricultural trading agreement between the United States and Canada called U.