Distinguishing the Differences between NAFTA & EU

NAFTA vs EU

The European Union (EU) is a large regional system consisting of European nations that have applied for and received membership. It is the largest free trade block in the world today, with the main aim of removing trade barriers between countries that share borders, cultures, histories, languages, and people. On the other hand, the North American Free Trade Agreement (NAFTA) is an attempt by the United States to have a free trade zone comparable to the EU. Although there are many similarities between NAFTA and the EU, there are also noticeable differences.

EU

Despite the European countries fighting wars among themselves for the last thousand years, Europe is a continent consisting of 27 countries that share a lot in common. The shared history, language, and culture have led them to aspire to create a large bloc of countries with no trade barriers and a supranational identity. The European Union is like a club joined by member countries, which come together to follow the rules for the common welfare of the nations and their people. It is a political and economic partnership of the 27 member countries that aims for prosperity and development of the entire region. The Maastricht Treaty of 1993 brought the EU into reality. The EU has been conceived as a single market area with a single currency, the Euro, used in all 27 member countries. With a combined population of nearly 500 million and a GDP of 20% of the total global GDP, the EU has become a strong political entity.

NAFTA

NAFTA is a creation of the US following the success and realization of the European Union. It is a large free trade area covering the US, Canada, and Mexico, the three countries within this geographical region. It was established in 1994 and has since been strengthened by the addition of several more treaties between NAFTA members in the areas of economic cooperation, labor, and security. Before NAFTA, there were numerous duties and barriers in trade between the member countries. American goods attracted these duties, and people in Mexico and Canada had to pay a higher amount to purchase these goods. Canada and Mexico have benefitted greatly from the implementation of NAFTA. The agreement has encouraged not only higher trade but also a higher level of immigration between the three countries.

Key Takeaways

• EU uses a single currency, the Euro, while NAFTA member countries use their own currencies.
• NAFTA is an agreement meant to foster trade between member countries, whereas the EU is a distinct political entity with the European Parliament in place.
• EU has emerged as a trading block for the rest of the world and a confederation that commands 20% of the world’s GDP, while NAFTA focuses on trade between the US, Canada, and Mexico.