Tariffs are a type of tax that people have to pay when transporting products from one country to another in order to sell them. What this means is that the three countries promised not to have tariffs between each other anymore. The North American Free Trade Agreement set up a free trade area between the North American countries of Canada, United States, and Mexico. ![]() North American Free Trade Agreement (NAFTA) In the years since, there has been a lot more instability in the world’s financial markets. The rest of the world’s countries had to subsequently adopt market-based rates for their currencies as well. The decision to give up on Bretton Woods was seen as damaging to the stability of the world’s financial system, which had functioned very well in the post-WWII years. ![]() This, however, was limited by the need to keep the supply of the dollar constant with that of gold. As the war was very expensive, the US government wanted to print money in order to finance it. The US decision to float the dollar was a product of the Vietnam War. This means that the price would no longer be stable and predictable, but rather ‘floating’ (i.e. Under the Bretton Woods system, the values of the US dollar was tied to the price of gold, and all the other currencies were tied to the US dollar.īy floating the dollar, the US decided to unilaterally to abolish the system.Īfter the floating of the dollar, the US dollar would no longer be tied to the price of gold but would instead be determined by market forces. One US dollar will be a different amount in Russian Rubles, which will be a different amount in Chinese yuan, and so on. The Bretton Woods system was an international arrangement, set up after the Second World War in Bretton Woods, New Hampshire, which governed how the currencies of the world’s countries were valued against each other.Ĭurrencies have different exchange rates relative to one another. In 1971, the US under President Richard Nixon chose to unilaterally leave the Bretton Woods System and float the dollar. This is why the locals reacted by taking up arms, as it was literally a threat to their lives. In a country like Mexico, competition of this kind can lead to severe loss of jobs in a region like Chiapas. ![]() In this case, the poor farmers had no way of competing with the multibillion-dollar American agricultural industry, with its highly efficient operations. While free trade brings its benefits (imagine for example, not having access to foreign foods or cheaper electronics), it also means increased competition. They feel that free trade under NAFTA endangered the livelihoods of the locals.įree trade is a key aspect of neoliberalism. The Zapatista Army of National Liberation is a libertarian socialist guerrilla movement, which supports the rights of the local farmers. This became known as the Zapatista Rebellion. Economic Development in Chiapas, Mexicoįollowing the implementation of the North American Free Trade Agreement (NAFTA) Treaty (see below), the local peasants in the poor southern Mexican state of Chiapas rose up in arms.
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