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NAFTA: An Introduction

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  1. 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

  2. Classical Liberalism’s Perspective • The country should benefit from lowering trade barriers • Better prices to consumers • Better goods (increased quality) • Markets for exporters • Economic Growth

  3. Classical Liberalism’s 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)

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

  5. 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?

  6. A Macroeconomic Analysis Source: The Economist

  7. A Macroeconomic Analysis Key Economic Indicators for Mexico Source: Economist Intelligence Unit. (Congressional Research Service)

  8. A Macroeconomic Analysis U.S.-Mexican Foreign Direct Investment Positions, 1994-2003 Source: U.S. Department of Commerce, Bureau of Economic Analysis. (Congressional Research Service)

  9. 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?

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