CURRENT STATE AND PROSPECTS FOR THE DEVELOPMENT OF THE NORTH AMERICAN FREE TRADE AREA

Abstract

This research aims to analyze current economic state of the North American Free Trade Area and to identify possible prospects for its development. The article explores the prerequisites for the formation of NAFTA, reasons for revising the agreement and compares the differences between the previous and updated agreements, an impact of integration association on the socio-economic status, trade and investment activity of the participating countries, prospects for its development and analysis of its economic cooperation with Ukraine. The empirical analysis shows a significant relationship between the U.S. GDP and foreign trade with Mexico and Canada, unemployment and interest rates. Its results revealed that the U.S. trade with Canada had a positive impact on the U.S. GDP; at the same time the U.S. trade with Mexico had a negative impact on the U.S. GDP, which became the main argument for President Trump in his pressure on Mexico to revise the terms of the NAFTA agreement. The regression analysis also showed that there is an inverse relationship between GDP and interest rate in the United States from 1994 to 2018. It was determined that the United States-Mexico-Canada Agreement (USMCA) is not fundamentally different from the previous one, but it can create new opportunities, for example, for workers and farmers in the United States, and new difficulties for Canada and Mexico. This agreement tightens labor standards and protection of intellectual property rights, especially in Mexico, thus, probably decreasing the attractiveness of Mexican economy to foreign investors, that is likely to reduce the U.S. investment in Mexico. Thus, Canada and Mexico are expected to receive less benefit from the USMCA for their economies than the United States.