NORTH AMERICA FREE TRADE AGREEMENT
For long it’s been said that a trade agreement between Mexico and developed countries such as United States and Canada would bring many benefits to the country. With the implementation of NAFTA, Mexico increased its exports and cash flow greatly. Manufacturing firms were the mains positively affected with this treaty by increasing their exportsconsiderably. However, not everything has been beneficial for the country; despite all, the implementation of the treaty hasn’t necessarily brought economic growth to the country along with prejudicial consequences.
In this essay we will analyze the NAFTA and the impact it has had to Mexico. We will go through both their economic and political effects in order to conclude whether the agreement hasbeen favorable for the country or it has affected it. We will also make a brief comparison with China’s development.
* What is NAFTA?
The name corresponds to “North American Free Trade Agreement”. It is one of the most distinguished economic blocs worldwide, which emerged as a strengthener of the ties among three neighboring countries. The treaty was implemented in January 1994 with theaim of eliminating borders to trade between the countries of Mexico, Unites States of America and Canada and it was created
This treaty is regulated by the rules settled by the assemblies of the three countries, which establish and provide the way disputes will come to a resolution to obtain favorable results in required cases.
The purpose of this treaty is to establish that all productsoriginated in the territory of the block will be free of tariff rates. Goods are considered as origin when they are obtained or produced entirely within the territory, even if the raw materials come from another country as long as the transformation is significant. The main objective is to reduce administrative barriers for exporters, importers and producers who do business within the framework ofthe Treaty (1st Standard Agreement).
* What economic impact has Mexico had since NAFTA?
It has been a great transformation in terms of trade for Mexico after NAFTA, both qualitatively and quantitatively. Exports in all economic sectors increased significantly, nearly tripling. Most of the exports are directed to the United States, and in 1998 replaced Japan as the second largest importer(Carlos Alba Vega).
Mexico's exports began to grow ten years before they sign the Free Trade Agreement (NAFTA). However, the signing of the treaty greatly opened unprecedented opportunities to export to the world's largest market, the U.S. Few alter the treaty started, exports increased approximately 20% the proportion of Mexico’s gross domestic product (GDP), reaching a level of 30% (MorenoBrid, J., Rivas Valdivia, J., Ruiz Naples, P.).
During the early eighties Mexico was primarily an oil-exporting based economy. Thirty years later, 80% of its total exports were manufactured products. Unfortunately, oil and agriculture products exports fell incredibly. (Moreno Brid, J., Rivas Valdivia, J., Ruiz Naples, P.)
In the last 10 years, Mexico has managed to raise its importance as anexporter. The country has shown a high growth rate; part of this growth has been because of foreign investment, such as automotive industries, electronics and manufacturing industries (Carlos Alba Vega).
In 1994, a stabilization program was implemented in response to the economic crisis.
During this period, foreign investment had an enormous economic influence and became responsible formore than half of manufacturing exports (Carlos Alba Vega).
* How has NAFTA have affected the political and social environment of the country?
Before the implementation of NAFTA, the proponents of the treaty in Mexico claimed that free trade and unregulated foreign investment would bring as a result job creation and income growth. However, critics of NAFTA predicted that benefits would be...