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The North American Free Trade Agreement (NAFTA) is a trilateral trade agreement between the United States, Canada, and Mexico, which came into effect on January 1, 1994. The agreement was aimed at increasing trade among the three countries by lowering tariffs and other trade barriers. Since its implementation, NAFTA has had a significant impact on the Gross Domestic Product (GDP) of the member countries, as well as on their Purchasing Power Parity (PPP).
GDP is a measure of a country`s economic output, which includes the value of all goods and services produced within its borders. PPP, on the other hand, is a measure of a country`s economic power, which takes into account the difference in the cost of living between countries. PPP is often used as a more accurate measure of a country`s economic health than GDP.
According to a study by the International Monetary Fund (IMF), NAFTA has had a positive impact on the GDP of the member countries. The study found that the GDPs of all three countries have grown significantly since the implementation of NAFTA. In particular, Mexico`s GDP has grown by an average of 2.5 percent per year, Canada`s GDP has grown by an average of 1.2 percent per year, and the United States` GDP has grown by an average of 0.5 percent per year.
The study also found that NAFTA has had a positive impact on PPP in all three countries. The PPP of Mexico has increased by an average of 2.3 percent per year, while Canada`s PPP has increased by an average of 1.2 percent per year. The United States` PPP has increased by an average of 0.4 percent per year.
Despite the positive impact of NAFTA on the GDP and PPP of its member countries, the agreement has been criticized by many. Some argue that NAFTA has led to job losses in the United States, as companies have moved their manufacturing operations to Mexico to take advantage of lower labor costs. Others argue that NAFTA has led to environmental degradation and the exploitation of workers in Mexico.
In recent years, there have been efforts to renegotiate NAFTA, with the United States, Canada, and Mexico agreeing to a new trade agreement in October 2018. The new agreement, called the United States-Mexico-Canada Agreement (USMCA), was designed to update and modernize NAFTA. The USMCA has yet to be ratified by the member countries, but it is expected to have a similar impact on the GDP and PPP of the three countries as NAFTA.
In conclusion, the North American Free Trade Agreement has had a significant impact on the Gross Domestic Product and Purchasing Power Parity of its member countries. While there are criticisms of the agreement, it has generally been seen as a positive force for economic growth and development in North America. The new United States-Mexico-Canada Agreement is expected to continue this trend, with updated and improved provisions that will benefit all three member countries.