The North American Free Trade Agreement (NAFTA) is a trade agreement between the

Question

The North American Free Trade Agreement (NAFTA) is a trade agreement between the United States, Canada, and Mexico whose purpose is to eliminate tariffs between the countries and promote all aspects of international trade.

There are many arguments for and against the treaty. One of the arguments against centers on the fact that Mexican industries do not have to meet the same environmental regulations as industries in the United States and Canada. The U.S. and Canada have intervened in the marketplace and tried to internalize some of the costs of pollution by placing regulations on the amount of pollutants that industries can emit.

Opponents of NAFTA point out that pollution is largely a free good in Mexico, and that being free to pollute gives industries in Mexico an economic advantage over those in the U.S. and Canada. Is there anything that can point us towards an equitable solution to this problem while still protecting the environment we all share? What is that solution?

Explanation / Answer

There is no tax on firms which pollute environment in Mexico, Hence it has given its industries competitive advantages over the Canada and USA. Following points may be considered to deal with this problem:

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