Free Trade Agreement in Mexico Creates Janus-Faced Aftermath
MEXICO CITY -- There were great expectations that the Mexican economy could once again see its bygone golden days thanks to benefits from the North American Free Trade Agreement (NAFTA), which went into effect in 1994.
As part of the economic reforms launched by the Zedillo administration, as well as the measures to revive the nation's economy, the NAFTA was aggressively initiated by Mexico.
In line with the International Monetary Fund's advice and well-educated economic bureaucrats' demands, the Mexican government, which had suffered from financial crisis in 1994-1995 caused by the depreciation of the peso, strived to launch an export-driven policy around 1994.
As of July this year, Mexico, as well as 28 other countries that have joined the FTA, came to an agreement with EU member countries concerning mutual trade.
The result was astonishing. Among others, exports became the most dynamic element of the Mexican economy in the 1990s.
Exports increased by 163 percent between 1993 and 1999. Inflation and foreign exchange rates, which had shown big fluctuations for a couple of years, were stabilized. Last year's GDP (General Domestic Product) growth rate was 3.7 percent and this year it is forecast to reach 5 percent.
In the beginning, NAFTA came to both Mexico and its people as a darling, but after six years since the Mexican economy entered into the NAFTA era, there remain negative and positive ripple effects on the Mexican economy and politics.
The economic effects of the NAFTA on the Mexican economy can be explained mainly with the ``maquiladoras,'' or in-bond industrial area, which are a sort of tax-free or tariff-free industrial complex.
As mandated in GATT/WTO Article 24, which states that the overall trade barriers of any new regional or bilateral trade agreement be no higher than preexisting ones, maquiladoras served as tax-heaven areas for domestic and foreign companies.
The reality facing the Mexican economy, however, is that initial expectations are far from being realized.
``The result of the NAFTA on the Mexican economy was just an increase in employment, which mainly occurred within the maquiladoras,'' said Victor M. …