Since the North American Free Trade Agreement (NAFTA) was enacted in 1994, the amount of foreign direct investment (FDI) inflow in Mexico has increased significantly. After 20 years since NAFTA’s inception, this paper examines how FDI flows into Mexico compare to total factor productivity (TFP) for the 1960-2013 period. Results show there is a statistically significant unexplained portion of TFP positively affecting FDI. Factors used to determine TFP include total imports, total exports, and unemployment rate from 1980-2013. Results conclude that there are implications regarding international trade policy of the negative effects on FDI as they pertain to Mexico before and after the inauguration of NAFTA.
Starting in the 1970s the United States began to demonstrate an interest in expanding their economic market far beyond their national borders. This process soon got the name of Globalization. The North American Free Trade Agreement (NAFTA) is the third agreement the United States signed into effect. This free trade agreement liberalize trade between Canada, the United States, and Mexico. Before and after the negotiations much debate existed as to the potential success and the set backs of this agreement. To this date debate exists, however more evidence is available as to the success of this economic policy. In this paper, I explore the negative effects that Mexico has endured as a result of NAFTA. I examine the economic, public health, and environmental impacts of this agreement. Furthermore, I dive into a series of labor strikes that took place in the later part of 2015 and earlier part of 2016 around the Lexmark Maquiladora. I examine the reality that laborers in Ciudad Juarez, Mexico experience on a daily basis. I examine this case study through a post-colonial lens. Looking at the “left-over” entanglement from Colonialism. My goal in researching this topic is to analyze the potential effects that developing countries like Mexico, might face upon integrating their economy into the Global Market. More specifically what can a developing country suffer upon entering a free trade agreement with an industrialized, imperialist country like the United States.
Since the North American Free Trade Agreement (NAFTA) has been such a debatable topic for the past 15 years of it's implementation, previous research has been conducted on this topic. However, most of this research ignores the positive effects that this agreement may have caused. The purpose of this thesis is to examine an industry that has experienced positive changes induced by NAFTA. The positive changes are expected to have occurred using expectations from classical international trade theory. Based off of these theories, the hypothesis is that in an industry that has experienced an increase in net exports, employment will have increased as well. This thesis examines the cattle industry in Colorado, which has seen a net increase in exports of beef products as a direct result of NAFTA. A qualitative research method was used, interviewing cattle ranchers in Colorado to gather data on the changes that have occurred since NAFTA. Results from data show that NAFTA has caused employment in this industry to remain stable over the NAFTA years. Also concluded from the data is that international trade models do not explain enough, resulting in expectations that do not capture the entire dynamics of free trade and globalization.
The implementation of the North American Free Trade Agreement (NAFTA) on January 1, 1994 signaled the economic integration of Canada, the United States, and Mexico. The economic theory behind international trade suggests the free flow of goods allows each nation to focus on comparative advantages, therefore permitting all parties involved to consume more goods of a better quality and at a lower price. The purpose of this study was to determine how agricultural trade patterns for Canada, the United States, and Mexico changed in terms of composition, value, and volume since the implementation of NAFTA. As several studies included suggest, Canada and the United States exhibit a comparative advantage in the production of eggs, maize, milk, beef, and wheat, and Mexico tends to exhibit a comparative advantage in the production of horticultural products such as asparagus, beans, chilies, cucumbers, eggplants, grapes, onions, pumpkins, strawberries, tomatoes, and watermelons. With this information in mind, this study sought to analyze whether or not NAFTA prompted each nation to specialize in the production of products for which they have a comparative advantage, thus the focus on the changing composition of agricultural trade. Additionally, this study attempted to determine if and when structural breaks in the trade patterns for the selected products happened (both in terms of value and volume). If the structural break happened before the implementation of NAFTA, then it may be suggested that the rising trade levels are simply the continuation of an already existing upward trend that may have started during the 1980’s. If the structural break happened around the time NAFTA was implemented, then there may be some evidence that NAFTA in particular propelled this increase in agricultural trade levels. This study relied on data provided by the Food and Agriculture Organization of the United Nations (FAOSTAT). Specifically, this analysis used international trade data, in terms of value and volume, for Canada, the United States, and Mexico for sixteen agricultural products from 1961 to 2011. The methodology consisted of various multiple regression models designed to detect a structural break in value and volume trends over time. The results suggest that most products exhibited a positive value and volume structural break in 1994, when NAFTA was put in place. Various products showed evidence of a different break date, but this break date tended to be in the mid 1980’s. This is not surprising given that Mexico’s economic liberalization began during this decade with its accession into the General Agreement on Tariffs and Trade (GATT) in 1986 and considering the 1988 Free Trade Agreement (FTA) between Canada and the United States.
Mexican-American immigration is positively related to Mexico’s macro and micro economic conditions. Empirical evidence shows that the effects of NAFTA are mixed. The trade policy raised the demand for skill by reducing rents in industries that previously paid high wages, increased FDI (foreign direct investment), increased Mexican-American trade and economic integration, and caused a reshuffling of unskilled wages in both Mexico and the US. These effects possess a positive relationship to geographical location and economies of scale, with northern states reaping the benefits of higher wages, more investment, and more trade. Although NAFTA was a step in the right direction, it has been overshadowed by the lingering effects of inflationary public investment. These policies inefficiently allocated resources in priority sectors and demographic shifts within the Mexican population. Neoclassical economic theory predicts convergence in goods prices across countries. This will lead to stable economic conditions for Mexico, thereby mitigating the push factors involved in Mexican-American emigration. Hypothesis: NAFTA significantly decreased immigration since implementation.
The recent emergence of the Euro, combined with the completion of a decade of North American Free Trade Agreement (NAFTA) has sparked interest in adopting a common currency for North America. This study examines the likelihood that Canada, Mexico, and the United States will adopt a common currency under fixed exchange rate regimes. The benefits and costs of a common currency are explored using the theory of optimum currency areas (OCA). Empirical research focuses on several variables including intra-regional and intra-industry trade, trade openness, gross domestic product, inflation rates, interest rates, economic growth rates, business cycle synchronization, factor mobility, fiscal policy and monetary policy coordination. The analysis also presents a comparative analysis of NAFTA with Economic and Monetary Union (EMU) nations on different economic criteria. Finally, correlation and regression analysis further explores the likelihood that members of NAFTA will economically integrate. Though this research concludes that it is economically feasible for NAFTA members to move towards a common currency, this venture depends on the political readiness of the nations.