1. Explain the static effects

1). Static effects are termed as the effects which are stated bythe reallocation of manufacturing and utilization of products. Thatis the effect caused due to the implementation of custom union thesectors of health, wealth and fortunes. These custom union resultsin the technical or structural modifications in member and nonmember nations.

Dynamic effects are concerned with the total market development.It also states the after effect of large growth of production onthe industries. These effects are caused due to breakage of tradebarriers amd expansion of market.

The trade creation states that the trade will grow when theconsumption get moved from a high cost manufacturer to low costmanufacturer. That is the economic welfare growth as a result ofjoining in any free trade regions. Custom union is an example offree trade region.

The trade diversion means that the trade will move from a lowcost manufacturer who lies away from the union to a high costmanufacturer who lies within the union. It results in a low cost ofthe products.

2). NAFTA is North American Free Trade Agreement. NAFTA aims tobreak the trade and investment barriers among the US, Mexico amdCanada. It was implemented on 1st january in 1994. Due to this,tariffs were implemented on more than 1/4 of the exports of Mexicoto the united states. Also tariffs were implemented on more than1/3 of the expoets of united states to the Mexico.

3). The NAFTA rules of origin states that at what place theseproducts are manufactured amd what raw materials are used tomanufacture them. Dutu free and tariff reduction are applied onlyon those products which are termed as originating goods by theNAFTA.

The rules of origin shoul includes the following :

• Variation in the categorization of tariffs or taxes.
• It should have the regional value content.
• Both of the above statements.

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