There are important distinctions between customs unions and free trade areas. Both types of trading blocs have internal agreements that the parties conclude in order to liberalize and facilitate trade between them. The crucial difference between customs unions and free trade areas lies in their relations with third parties [disambiguation required]. While a customs union requires all parties to establish and maintain identical external tariffs for trade with non-parties, parties to a free trade area are not subject to such a requirement. Instead, they may introduce and maintain customs treatment for imports from non-parties they deem necessary.  In a free trade area without harmonised external tariffs, the Parties will introduce a system of preferential rules of origin in order to eliminate the risk of trade offshoring.  The North American Free Trade Agreement (NAFTA; Spanish: Tratado de Libre Comercio de América del Norte, TLCAN; The North American Free Trade Agreement (NAFTA) was an agreement signed by Canada, Mexico and the United States that created a trilateral trading bloc in North America. The agreement entered into force on 1 January 1994 and replaced the 1988 Free Trade Agreement between the United States and Canada between the United States and Canada.  The NAFTA trading bloc was one of the largest trading blocs in the world in terms of gross domestic product. In 2015, the Congressional Research Service concluded that “the overall net effect of NAFTA on the U.S. economy appears to be relatively modest, largely because trade with Canada and Mexico accounts for a small percentage of U.S. GDP.
However, there have been adjustment costs for workers and businesses as the three countries have adapted to more open trade and investment between their economies. The report also estimates that NAFTA has added $80 billion to the U.S. economy since its inception, representing a 0.5% increase in U.S. GDP.  One of the most affected agricultural sectors has been the meat industry. Mexico became the second largest importer of U.S. agricultural products in 2004, a small player in the U.S. export market before 1994, and NAFTA may have been a major catalyst for this change. .