North American Free Trade Agreement

NAFTA Dollar

NAFTA stands for the North American Free Trade Agreement. NAFTA consists of three countries: The United States, Canada, and Mexico. Currencies have been at the focus of the international economy in the past few years. Currently, each one of these countries holds their own currencies. Government officials and citizens of NAFTA member countries have been questioning if NAFTA countries should convert to a single currency.

The majority of countries in the European Union have converted to a single currency, called the “Euro”. Many believe that this has been a great success. Results from conversion of the currencies in the EU have created many positive outcomes for EU citizens. Citizens no longer lose money on exchange fees, there is free trade between EU countries, and both borders and tariffs have been eliminated.

History shows a continuous desire for NAFTA countries to move toward a single currency since change is economically and politically reasonable, considering that the benefits of having a common currency easily exceed the costs. Apart from making travel easier, a single currency makes very good economic and political sense.

Over one and a half trillion dollars in currency is traded every day. This is equivalent to about three hundred dollars for every person on the planet every single day, (www.globalfinancialdata.com). Obviously, if NAFTA countries switched to a single currency, significant savings would occur.

Since money is a public good, the government provides the coin of the territory, meaning society does not have to incur the costs of agreeing on a standard for carrying out economic activity. Having a single currency for the United States makes economic transactions easier than having a different currency in every state of the union. Since this works for all the different states in the United States, it makes perfect since for the NAFTA countries to convert to one single currency as well. There are several...