Hi, welcome back to Global Business Environment. This is module six, and it'll be part two of module six, in which we're asking the question, is today's world really dominated by free trade, freer trade, or managed trade? Last time we were talking about the rise of so-called free trade agreements across the world over the last decades. And we talked about free trade agreements, or freer trade agreements, or managed trade agreements, we might call them to be more specific since they're not true free trade, 0% tariff agreements. We talked about the rise of country to country individual, free trade agreements. We talked about regional trade agreements. And we also talked about the World Trade Organization and worldwide attempts to bring freer or managed trade to the world. One, one example we pointed out was the NAFTA, which is the North American Free Trade Agreement between Canada, the United States and Mexico, which was negotiated and became official in the early 1990s. Here's an image of the signing ceremony between the three nations and their heads of state and this was a major pact that has had a major impact on trade flows and investment flows. We haven't talked much about investment flows, we will later in the course but it has had a major impact on both Uu, since that period. And, has generally been correlated with increased prosperity overall since that, signing. Here's the picture of the entire agreement and, that's hundreds of pages long. It's a, it's a very large two-volume agreement. And I ask you once again, if it's the North American Free Trade Agreement, and it's supposed to be zero tariffs if you, if you understand free trade to mean zero tariffs, why do they need to have all these pages? What's in it? If it were really a true free trade agreement, it'd be one page saying, these three countries agree that they will not charge tariffs to each other higher than 0%, or there will be no tariffs, something like that. In fact, this book shows you that it is freer or managed trade. All these pages are the exceptions. The allowed deals or special interests represented. Specific industries, like the sugar that I mentioned for the United States, a protection for those markets. And, you know, these are complex matters. They involve real lives and real yeah, employment of, of real companies, and so we recognized that. On the other hand, sometimes, the beneficiaries are, shareholders or larger companies that, might have monopolistic type positions that aren't really for the benefit of customers and citizens. And so that's what this represents. Some industries receive protection for an additional number of years. Some industries were excluded. And each country, none is exempt has their own interests. Here's one particular industry that had its own set of interests protected. And this isn't the NAFTA per se. But this is an article from the Wall Street Journal from 2013. And it's talking about changes being made in the retail clothing industry in, Mexico. And, what it basically says is that the Mexican market had been protected from textiles, or clothing imports, from China for a number of years. And local clothing manufacturers and also department stores that had somewhat protected or quasi-monopolistic positions you might argue were the beneficiaries of these protected markets, these high tariffs. Those companies feared the jobs lost and the profits lost from having to compete with Chinese imports of clothing into Mexico. And so guess what happened over many years up until this the change beginning in 2013? Well, what happened was clothing was more expensive than it needed to be, and many brands were not sold in Mexico. And so what this article talks about is the plan for companies like Gap, H&M, American Eagle Outfitters, who had never had stores in Mexico to open stores. Because now it was competitively feasible, or they could make a profit on opening their store, since they could import their clothing from China, which is a lower cost site for manufacturing clothing. And so, the Mexican economy, you might argue, is now better off with more choice and, more options, more, lower prices than they were before these protected markets existed. And so, this is a practical example in this article of the arguments we've made for free, or freer trade. And so as this happens, you see great shifts in markets. You see the previously protected markets perhaps compete. Sometimes we see failures, we see new innovations, we see even lower prices coming into the market than expected. And so all countries experience this, we're not pointing out Mexico as having some special difference or doing this to a larger degree. We're just pointing out a change that's happened in the recent past with an example that many of you might be familiar with. And so, in fact, this is another piece of of evidence to answer our question, is today's world dominated by free trade, freer trade, or managed trade? This is an example of freer trade and moving towards freer trade but it shows that trade is still clearly managed in today's world. And so this ends part two, in which we've talked about regional trade agreements, free trade agreements. Next time we will talk about non-tariff barriers to trade across the world, and how they have influenced trade over the last decades. Thank you.
