NAFTA: Good or Bad for Mexico?

1
(No Transcript)
2
NAFTA An Introduction

• Eliminates restrictions on the flow of goods,
  services and investments between Mexico, Canada,
  and the United States
• Went into effect January 1994
• All tariffs will be phased out by 2008

3
Classical Liberalisms Perspective

• The country should benefit from lowering trade
  barriers
• Better prices to consumers
• Better goods (increased quality)
• Markets for exporters
• Economic Growth

4
Classical Liberalisms Perspective

• However, freer trade has not come without serious
  social costs
• Asymmetric benefits
• Rural Mexicans have lost jobs
• Worker rights issues
• Environmental Degradation
• - Social Unrest (Zapatista protests)

5
Neoliberal Institutionalist Perspective

• Economic integration has allowed Mexico to reap
  absolute gains
• Increased international trading power and
  influence
• US Assistance
• Monetary stabilization
• GDP growth

6
A Macroeconomic Analysis

• NAFTA has been very politically controversial
• Only 29 of Mexicans think the treaty is helping
  them
• How should we evaluate the success of a trade
  agreement?

7
A Macroeconomic Analysis
Source The Economist
8
A Macroeconomic Analysis
Key Economic Indicators for Mexico
1994  2004 
Population (millions) 91 105
Nominal GDP (US billions) 422 677
GDP, PPP Basis (US billions) 671 1,017
Per Capita GDP (US) 4,617 6,450
Per Capita GDP in PPPs 7,351 9,680
Total Merchandise Exports (US billions) 71 215
Exports as of GDP 17 32
Total Merchandise Imports (USbillions) 91 216
Imports as of GDP 22 32
Public Debt/GDP 32 23
Source Economist Intelligence Unit.
(Congressional Research Service)
9
A Macroeconomic Analysis
U.S.-Mexican Foreign Direct Investment
Positions, 1994-2003
  Mexican FDI in the U.S.
1994 2,069
1995 1,850
1996 1,641
1997 3,100
1998 2,055
1999 1,999
2000 7,462
2001 6,645
2002 7,483
2003 6,680
Source U.S. Department of Commerce, Bureau of
Economic Analysis. (Congressional Research
Service)
10
Questions

• Is NAFTA good or bad for Mexico?
• Do the aggregate economic gains merit the social
  costs?
• What is the future of NAFTA in Mexico? How will
  Mexico change as a result of the agreement?