A quarter century ago Canada, Mexico and the United States formed a customs union, known as NAFTA. This is not a common market, and indeed there are an estimated 7 to 10 million illegal immigrants living in the United States, many of whom are Mexicans. Furthermore, “illegal drugs are the most successful Mexican multinational enterprise, employing some 450,000 Mexicans and generating about $20 billion in sales, second only behind the country’s oil industry and automotive industry exports”. (Source: David Luhnow, “Saving Mexico”, WSJ, December 26, 2009.)
A. Distinguish between a customs union and a common market.
B. Explain why there has been a growth in the underground economy of the United States.
C. Evaluate the following non-exclusive means of diminishing the underground economy:
-Transform NAFTA into a common market.
-Legalize drugs.
- Increase both the surveillance by the IRS of the 30 million businesses in the United States and reform the tax system by introducing, for example, a value added tax.
-Increase the effectiveness of surveillance of social security recipients from gaining income from the underground economy.