A quarter century ago Canada, Mexico and the United States formed a customs unio

Question

A quarter century ago Canada, Mexico and the United States formed a customs union, known as NAFTA. This is not a common market, and indeed there are an estimated 7 to 10 million illegal immigrants living in the United States, many of whom are Mexicans. Furthermore, “illegal drugs are the most successful Mexican multinational enterprise, employing some 450,000 Mexicans and generating about $20 billion in sales, second only behind the country’s oil industry and automotive industry exports”. (Source: David Luhnow, “Saving Mexico”, WSJ, December 26, 2009.)

C)Evaluate the following non-exclusive means of diminishing the underground economy: 1.Transform NAFTA into a common market. 2.Legalize drugs. 3.Increase both the surveillance by the IRS of the 30 million businesses in the United States and reform the tax system by introducing, for example, a value added tax. 4.Increase the effectiveness of surveillance of social security recipients from gaining income from the underground economy.

Explanation / Answer

1) Transforming NAFTA into common market. :
NAFTA stands for North American Free Trade Area. In its name it is clear that the arrangemement is free trade area arrangement which only allows free movement of goods and services. IT is the first step towrads economic integration. In common market labor is allow to freely move across country. Thus converting NAFTA in common market would definitely solve the problem of illegal Mexican migrants but the problem of illegal drugs would be there still.

2) Legalize Drug: Legalizing drug would solve the problem of the Multinational firm. Legalizing firm through legalizing drugs would somewhat solve the problem of illegal migrants also. As the MNC can bought its home country national to work in US.

3) Increase both the surveillance by the IRS of the 30 million businesses in the United States and reform the tax system by introducing, for example, a value added tax.: This would reduce the level of development with less after tax investment.

4) Increase the effectiveness of surveillance of social security recipients from gaining income from the underground economy: the problem of illegal migrants will still remain.

Hence option 2 could be most preferrable.

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