NAFTA’s first decade – Accomplishments and failures from the Mexican perspective

Seminar paper from the year 2007 in the subject Politics - International Politics - Region: Middle- and South America, grade: 1,0, Friedrich-Alexander University Erlangen-Nuremberg, 29 entries in the bibliography, language: English, abstract: On January 1, 1994, Mexico, Canada, and the United States established the largest freetrade area ...

Seminar paper from the year 2007 in the subject Politics - International Politics - Region: Middle- and South America, grade: 1,0, Friedrich-Alexander University Erlangen-Nuremberg, language: English, abstract: On January 1, 1994, Mexico, Canada, and the United States established the largest freetrade area under the North American Free Trade Agreement (NAFTA) after two and a halfyears of negotiation. This agreement created a free trade area on the North Americansubcontinent with approximately 431 million inhabitants and a GDP of about $15.3 trillion in2006. NAFTA represented an important milestone in global trade policy, not just because ofthe sheer size of the free trade area it has created, but also with regard to thecomprehensiveness of the agreement. It covered not just merchandise trade but also issuesrelated to investment, environmental policies, energy generation, and labor markets.NAFTA’s primary goal was the creation of a free-trade area with free movement ofgoods, service and capital, but no common market. In order to prevent the abuse of differentexternal import tariffs, NAFTA implemented strict rules of origin. NAFTA is focused oneconomic cooperation and does not - in contrast to the European Union - intend a deeperpolitical integration or the transfer of national sovereignty to a supranational organization.The creation of NAFTA is based on the fact that three countries, despite different sizeeconomic structure, and ethnical background pursued the same goal, the establishment of acloser regional economic integration. Differences in economic terms between the membercountries can be clarified by the distribution of NAFTA’s GDP in 2006. More than 86.2percent of NAFTA’s total GDP was generated by the United States whereas Mexicocontributed only 5.5 percent, which reflects the state of Mexico’s economic development.Additionally, the Mexican GDP per capita amounted to only 18 respectively 20 percent of theGDP per capita in the United States and Canada.4 This heterogeneity between the threeparticipating countries may be the most significant aspect of this agreement.This paper discusses NAFTA’s accomplishments and failures after its first decade fromthe Mexican perspective as the agreement has been confronted with skepticism from itsinception until today. While Mexican officials understood NAFTA as a measure to modernizethe country through free trade, critics feared the transformation of the Mexican economy to a huge maquiladora where investors are mainly focused on the exploitation of Mexico’s lowlabor costs.5 Since the beginning of negotiations, Mexico’s former President Salinas hasraised high expectations on the Mexican side in economic and social terms with his statement:“The whole point of NAFTA for Mexico is to be able to export goods and not people. Thatmeans creating jobs in Mexico.” In order to highlight whether NAFTA resulted in economicas well as social improvements, this paper focuses on a comparison of these two aspects.