Smith says that people have a natural tendency to trade, but the government interferes through, taxes, trade quotas, tariffs, and regulating commerce (Smith 101). The removal of all tariffs and barriers to trade under NAFTA is the direct influence of this principle. Under Smith's model of trade as you engage in trade you get more than you give, so everybody benefits from trade in other words it is mutually beneficial (Smith 103). .
In On the Principles of Political Economy and Taxation British political economist, David Ricardo proved Smith's theory and offers his own similar theory. He was a proponent of free trade and against tariffs. His theory of trade was that everyone is wealthier or better off through trade and proved its benefits. His notion of comparative advantage was to produce what you can produce more cheaply and buy what you can buy more cheaply (Ricardo 121). Part of Ricardo's legacy is that the policies that he put forth are still upheld through his advocacy and rules of free trade that he proved to be beneficial which can be seen in NAFTA. However, a criticism of his theory is that benefits all parties, but each class does not benefit within each country (Professor Meyer, Lecture 02/21/14). .
A brief history of NAFTA is crucial to understanding how it has been influenced and whether or not it has been successful. NAFTA is documented with the WTO to cover goods and services, the current signatories are Canada, Mexico and the United States, the type of agreement is a free trade agreement and economic integration agreement, the RTA composition is plurilateral, the region is North America, all parties are WTO members and the end of the implementation period is 2008 (WTO). Though, it was signed by President Clinton in 1994, the idea came about from the presidencies of President Ronald Reagan and President George H. W. Bush (Hartman 6). NAFTA came after the Canada-U.S. Free Trade Agreement (CUFTA) on January 1, 1989 which addressed the "removal of agricultural tariffs over a decade, improved access to markets for products and lowered the use of subsidies" (Hughes 2000 within Hartman 7).
