In 1994, the North American Free Trade Agreement (NAFTA) represented a turning point in the relationship between Mexico and the USA and was considered likely to resolve key bilateral issues. NAFTA was thus a sort of promising frame to achieve the benefits of interdependence in a globalizing world. Nowadays, North America is the largest free trade area in the world in gross product and territory, and no three nations in the world trade as much with each other as do the United States, Canada, and Mexico. The theoretical justification of regional agreements underlines several elements: peace in the area, cooperation between countries, bargaining power, the "dépassement" of the WTO and before the GATT (uncertainty of discussions and of economic sectors at stake), and the promotion of internal reforms. When analyzing the situation in order to assess the effects of the agreement, the problem is, to make the distinction between what would normally take place without NAFTA and the weight of other factors that influence the observed trends, and those that are directly induced by the agreement. In the case of regional agreements, many economists and analysts use what it is called an anti world perspective, thus assessing the trends and evolutions in a scenario without the agreement. In the present paper, we will only try to qualify the observations by highlighting different studies on the actual effects of NAFTA.
[...] Nowadays the United States is the largest source of FDI in Mexico, accounting for 65% of total FDI in 2003. U.S. FDI in Mexico increased by 263 percent whereas Mexican FDI in the United States is much lower with 5 percent of total FDI in the USA and fluctuates a lot over the time (graph II-23). Graph II-23: Annual flows of foreign direct investment between Mexico and the United States, 1994-2003 (in billions of US$). Source: International Economic Accounts, U.S. [...]
[...] Regarding macroeconomic effects, the impact of NAFTA is even harder to determine. The World Bank estimated this impact to a 0.04 percent increase of the annual GDP growth in the USA and to a 0.8 percent for Mexico. It also, concluded that Mexico's economic performance was similar to the rest of Latin America prior to NAFTA. The Mexican GDP per capita increased during the period but the without the agreement, the growth rate would only have been lower by 2002. [...]
[...] merchandise imports came from Mexico whereas for Mexico, the United States is a much more significant trading partner with 90% of Mexico's exports go to the United States and about 60% of Mexico's imports come from the United States. The extreme historic discrepancy between the United States and Mexico induced very different macroeconomic and microeconomic structures. In the 90's, Mexico was exhausted by its import-substitution strategy of 80's and by the succession of debt crises whereas the United States was already a super power with strong economic fundamentals. [...]
[...] NAFTA only contributed to reinforce this previous trend by locking the reforms and increasing investor confidence. However, it seems that NAFTA did trigger off significant changes of regulations governing the maquiladora industry. Nearly half of total FDI investment in Mexico is in the manufacturing industry of which the maquiladora industry forms a major part[1] enabling the USA to locate their labor-intensive operations in Mexico and lower their labor costs in the overall production process. The maquiladora industry provides U.S. industry group with cheap labor force, enabling them to remain competitive while the geographic proximity allows production to have a high degree of U.S. [...]
[...] Mexican trade liberalization was accompanied by national policy revisions that did away with government support programs and, instead, focused on increasing export led-growth” (2005). In Mexico, corn production and consumption are deeply intertwined in the nation's social and cultural fabric and is one of the three traditional elements of Mexican food with beans and chile. Corn in Mexico accounted for 60 percent of cultivated land, employed 3 million farmers who produce local varieties percent of Mexico's population and 40 percent of people working in agriculture) and was the country's main staple food crop. [...]
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