Understanding the Colonial Economy: Mexico / NAFTA
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Often teachers and students are able to internalize historical and economic concepts through a more recent event that has occurred within their time frame. This lesson is an extension for the lesson, "Understanding the Colonial Economy." It examines the role and effect of NAFTA in the Mexican and US economies.

Review the lesson for "Understanding the Colonial Economy," from the Eyes on the Economy: Part I. You learned that the colonists produced what they could best produce relative to their available resources and that they could export at a competitive price. They then traded these goods and earned more income that led to the colonists expanding their output. Through trade both the Europeans and the colonists gained more products and were better off than if trade was not conducted.

Look at the quote from Adam Smith and answer the following questions:

1. How does Adam Smith's philosophy relate to what you have learned in the lesson, Understanding the Colonial Economy? answer
2. Do you think this theory still holds true today? answer
3. Explain why you think this theory still does or does not hold true? answer

Review these definitions to get a better understanding of tariffs , quotas and subsidies.

A recent agreement was made between the United States and Mexico and Canada called the North America Free Trade Act or NAFTA. NAFTA was passed by the United Congress in 1993. The underlining purpose of this legislation was to remove some tariffs and quotas in order to improve trade among the three partners, United States, Canada and Mexico. Look at the key points of NAFTA. Listen to an interview with Lacey Gallagher of Standard and Poor's.

Complete the WEBQUEST activity before continuing.

Remember that quote from Adam Smith? He pointed out in 1776 that if countries specialize and trade all parties benefit. Knowing this, do you think that as a result of NAFTA, trade increased between the United States and Mexico and improved the economic welfare of both nations? Explain. answer

How might NAFTA affect you and your future? answer