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Mexican Experiences with NAFTA



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Code : ITF0017

Year :
2004

Industry :General Business

Region : :Mexico

Teaching Note: Not Available

Structured Assignment : Not Available

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Introduction: Mexico signed the ‘North American Free Trade Agreement’ (NAFTA) along with the US and Canada in December 1992, which came into effect fromJanuary 1994. The agreement was signed to implement a free trade area in North America and thereby, usher in a rapid economic growth in the region. Subsequently, the trade between the three countries increased from$109 billion in 1994 to $622 billion by 2000,with tradeworth $1.7 billion2 per day. The share ofMexico in the trilateral trade increased from15%in 1993 to 20%in 2001.3 Its foreign trade rose to 76%of theGDP (between 1994 and 2000) from37%4 (between 1985 and 1993). After the implementation of NAFTA, the per capita income in Mexico rose by 24% to $4,000.5 It was also opined that NAFTAtransformedMexico froma single-party dominated nation to a multi-party democracy – “It’s hard to believe democracy would have come to Mexico as quickly without NAFTA.”6 NAFTAintegrated the Mexican economy with two of the world’s biggest economies – the US and Canada. Although NAFTA had many positive impacts on the Mexican economy, it was believed that Mexico had to bring rapid changes in its social set-up, especially in its educational system, to stand the competition fromother developing economies like China – “Everybody recognised thatNAFTAwas an extraordinary bold attempt to accelerate economic integration or, as critics put it, an experiment in reckless globalisation.”7 Still, after joining NAFTA, the Mexican economy graduated fromthe 15th position (in the early 1990s)8 to become a $594 billion9 economy by 2003 – the ninth largest in the world.

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