The free trade agreement was concluded in 1988 and NAFTA extended most of the provisions of the free trade agreement to Mexico. NAFTA was negotiated by the governments of U.S. President George H.W. Bush, Canadian Prime Minister Brian Mulroney and Mexican Prime Minister Carlos Salinas de Gortari. An interim agreement on the pact was reached in August 1992 and signed by the three heads of state and government on 17 December. NAFTA was ratified by the national parliaments of the three countries in 1993 and came into force on January 1, 1994. At the time of Smith, Ricardo and Hecksher-Ohlin, businesses were generally small and most international trade was made in agricultural or mineral products or in small production. However, until 1947, the large industry had evolved and much of the trade was manufactured.  See z.B., ibid., 54: “The comparative advantage theory assumes that trade is balanced (i.e. exports of imports of equal value) and that work is fully occupied. If trade is not balanced, the surplus country must export certain products for which it has no “real” comparative advantage. In addition to diversion of trade and the creation of trades that have essentially static effects, participants in free trade zones and union unions also aim for dynamic benefits, such as expansion production, as companies take advantage of the growing size of the market to increase production and improve efficiency when firms adapt to increased competition. Access to a larger market is particularly important for small countries whose economies are too small to warrant large-scale production. The second factor that can affect a country`s current account balance is the exchange rate.
The exchange rate refers to the amount of currency that can be purchased by a country`s own currency. According to economic theory, if a nation has a persistent trade deficit, its exchange rate is expected to fall against its trading partners – for example, if the United States has a persistent deficit, the dollar should buy fewer currencies like the euro or the yen. This would mean that imported products would cost more because they would cost more dollars for each unit of foreign currency, resulting in lower imports. In addition, U.S. exports are expected to grow, as foreigners can buy more of their products for any unit of their currency. The main provisions of NAFTA required a gradual reduction in tariffs, tariffs and other trade barriers between the three Member States, with some tariffs to be abolished immediately and others over a 15-year period. The agreement guaranteed duty-free access for a wide range of industrial products and goods traded between the signatories. “Domestic goods” have been granted to products imported from other NAFTA countries and prohibit all governments, local or provincial, from imposing taxes or tariffs on these products. From the time of Adam Smith in 1776 until the introduction of the GATT in 1947, the theory of economic trade developed quite slowly. However, since the creation of the GATT in 1947, there have been a number of significant changes in the traditional Western economic theory of international trade.
These amendments largely update the fundamental theory of trade to reflect the new realities of industry and trade. China has comparable trade surpluses. However, China has linked the renminbi to the dollar, preventing its exchange rate from rising and thus restoring a trade balance.