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Is Mexico better off with NAFTA

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Introduction

QUESTION 5 This essay aims to critically evaluate if Mexico is better off as a result of the North American Free Trade Agreement (NAFTA). In reality, NAFTA is an extension of the Free Trade Agreement (FTA) between the United States and Canada which entered force in 1989. FTA expanded to include Mexico and January 1 1994 NAFTA came into effect and was the largest free trade area in the world, comprised of Canada, the United States and Mexico. This made North America the one of the most economically integrated regions of the world. Worth noting in relation to NAFTA; this was the first time industrialised economies, such as the United States and Canada, integrated a non industrialised economy, Mexico, to such extent. According to the governments of the NAFTA signatories; "NAFTA fuels economic growth and dynamic trade, stimulates investment whiles creating productive partnerships, works for small and medium-sized businesses and provides fairness and certainty. NAFTA partners promote environmental protection, and provide greater job opportunities in North America"1. With an outset in the latter statement, this essay will first give a short introduction to NAFTA; why would Mexico join in? Its structure and elaborate on its specific main goals. Then, on the basis of statistical analysis of Mexico before and after NAFTA, it will critically compare the main objectives of NAFTA in relation to the actual development in Mexico. This will in turn enable this essay to reach a clear and objective conclusion on whether Mexico is better off as a NAFTA member and also investigate some future potential Mexican trade issues in relation to NAFTA. ...read more.

Middle

The fact of the matter is that NAFTA has not been able to create a sufficient level of job opportunities in Mexico. In the post NAFTA era Mexico has experienced a shift in export. Traditionally Mexico exported mostly agricultural products to its NAFTA members, but after the cut in tariffs on imports, a growing trade deficit in agricultural trade with the United States is evident. This in turn is offset by a surplus in manufactured goods exported from Mexico. The result of this diversification in Mexican trade; a loss of over one million jobs in the agricultural sector since 1994, while the manufacturing sector has only produced 500,000 new work places. 8 "The US government reports that even in nominal dollar value terms, Mexican manufacturing wages were no higher in 2000 than in NAFTA's first year and considerably lower than in 1981, prior to Mexico's sweeping market reform. Making ends meet in Mexico's rural areas is even tougher. NAFTA opened floodgates to cheap US corn imports, leading to an 18-fold increase between 1993 and 2000. The devastating impact on Mexican farmers is reflected in the rising rural poverty rate, which climbed from 79 per cent in 1994 to 82 per cent in 1998, according to the World Bank"9. The "Tequila Crisis" is obviously one factor to the slow growth in wages, but still increased productivity fails in converging Mexican wages to American wages, which most theory suggests it should do. Why has increased trade and FDI resulted in lower wages and less jobs for the Mexican people? ...read more.

Conclusion

Then at the same time it is hard to believe that trade, FDI or productivity would be at the same level as it has been in the post NAFTA period. The failure of NAFTA has not been in fuelling the economy, but rather to transfer the growth in this area to Mexican society. So in many ways NAFTA has actually come true on their promises. In reality even though NAFTA is a fairly negotiated deal, trade agreements has a tendency to create winners and losers, especially when one part of the deal is obviously so much weaker than the other. Mexico is not a loser in this agreement, but the developments of NAFTA has not come around as quickly as one might had hoped for. WORD COUNT: 2497 1 Audly, J. J., Papademetriou, G., D., Polaski, S., Vaughan, S. (2004) p. 5 2 Ravenhill, J. (2005) p. 126 3 Kose, A., M., Meredith, M., G., Towe, M., C. (2004) p. 9 4 Kose, A., M., Meredith, M., G., Towe, M., C. (2004) p. 9 5 Kose, A., M., Meredith, M., G., Towe, M., C. (2004) p. 35/36 6 Weisbrot, M., Rosnick, D., Baker, D. (2004) 7 Audly, J. J., Papademetriou, G., D., Polaski, S., Vaughan, S. (2004) p. 14 8 Audly, J. J., Papademetriou, G., D., Polaski, S., Vaughan, S. (2004) p. 20 9 Cavanagh, J., Anderson, A., Serra, J., Espinosa, E., J. (2002) 10 Gruben, C., W. (2006) 11 Audly, J. J., Papademetriou, G., D., Polaski, S., Vaughan, S. (2004) p. 40 12 Kose, A., M., Meredith, M., G., Towe, M., C. (2004) p. 28 13 Emmond, K. (2006) Imagining Mexico Without NAFTA ?? ?? ?? ?? 1 ...read more.

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