Question 1

Why is NAFTA controversial? Briefly describe both sides of this controversy.

Accepted Answer

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Question 2

Membership in a customs union may be either welfare improving or welfare worsening.Illustrate and explain.

Accepted Answer

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Question 3

Recent studies have shown that NAFTA has had a tremendous negative impact on the economic welfare of the U.S.

Accepted Answer

While NAFTA has had mixed effects, it has not had a "tremendous negative impact" on the U.S. economy overall. Studies show it has had modest positive and negative effects, including increased trade and efficiency gains, but also job displacements in certain sectors.

Question 4

The welfare impact of a preferential trade agreement depends on the difference between the amount of new trade that takes place because of the agreement and the change in international trade patterns that arises because of it.

Accepted Answer

The welfare impact of a preferential trade agreement depends on the net effect of the new trade that takes place because of the agreement and the change in international trade patterns that arises because of it. Thus, the statement is true.

Question 5

The ultimate purpose of the NAFTA free trade agreement is to balance trade between the member nations.

Accepted Answer

The ultimate purpose of the NAFTA free trade agreement is to eliminate barriers to trade and investment between the member nations, not to balance trade.

Question 6

The push toward creating more regional trade agreements necessarily harms the multilateral liberalization process that is at the heart of the WTO.

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Question 7

Compare and contrast NAFTA and the EU in terms of the types of agreements that they are,the institutions that operate under the agreement,and the long term goals of the arrangements.

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Question 8

Summarize the type of agreement that NAFTA is,its history,the process by which it has been implemented in the last 15 years.

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Quiz 9: Preferential Trade Agreements