9.2.3: Economic Alliances- European Union and NAFTA
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- 212726
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One of the most prominent economic alliances in the world is the European Union (EU), which consists of 28 member states (Figure 8.4). What began as the European Community (EC) in 1958, the European Union has grown significantly from the original six members and now includes seven Eastern European states that were formerly in the Soviet Union. The EU has developed a common currency, the euro, for all member countries and a European Central Bank. Furthermore, at most boundaries, a passport is not required to enter another country.
One of the weaknesses of the EU is the need to subsidize poorer countries, creating financial difficulties for the more wealthy members. For example, Greece has experienced large debts that have required rescue funding from the EU. Another issue confronting the EU is whether or not to allow Turkey to join, as Greece has long-standing disputes with Turkey over territory in Cyprus, and the Turkish central government has been accused of anti-democratic practices. Perhaps most concerning for the EU is the imminent departure of the United Kingdom (UK) from the alliance in an action termed “Brexit.” In 2016, the UK voted by referendum to leave the EU, and is on schedule to formally break away in 2019. The UK’s decision to leave the EU is not solely related to economics, as not only is the EU an economic alliance, but agreements on social and political policies are involved as well. The majority of British citizens are generally against the subsidizing of poorer states and the increasing number of immigrants who use scarce public resources, and they generally desire greater autonomy. With the exit of Britain from the EU, EU members are concerned that other states may follow suit.
Figure | European Union Author | U.S. Central Intelligence Agency Source | Wikimedia Commons License | Public Domain
An important economic alliance for the United States is the North American Free Trade Agreement (NAFTA). Established in 1992, this alliance integrates the United States, Mexico and Canada and facilitates the flow of goods and services across borders. The Trump administration has repeatedly criticized this agreement, as manufacturers have relocated production to Mexico which has resulted in the loss of manufacturing jobs in America. Whether or not the United States withdraws from NAFTA or simply renegotiates the agreement remains to be seen.
Another significant alliance that is being considered is the Trans-Pacific Partnership, an agreement between 11 countries that border the Pacific Ocean, and originally included the United States. The proposal was signed in February 2017, but the United States had already withdrawn from the agreement in January of the same year, making ratification virtually impossible. The goal of the agreement is to promote economic prosperity by lowering tariff barriers, but also promote environmental and labor protections as well as protect intellectual property. Critics say that it would result in the loss of U.S. jobs and weaken the sovereignty of the U.S.