North American Free Trade: Issues and Recommendations

By Gary Clyde Hufbauer; Jeffrey J. Schott | Go to book overview

3
Trade Effects of a NAFTA: A Survey

Mexico's trade, like Canada's, exhibits a lopsided dependence on the United States (table 3.1). Mexican merchandise trade with the United States runs to about 75 percent of Mexican imports and exports; Mexican exports to the United States (including total maquiladora. shipments) account for some 13 percent of Mexican GDP. In contrast, US merchandise trade with Mexico consistently runs between 5 percent and 7 percent of US imports and exports (table 3.1), and US exports to Mexico make only a small contribution to US GDP.

In 1980 the composition of Mexican exports was dominated by energy products (table 3.2). Crude oil exports peaked in dollar terms in 1982-84 and then fell off. Meanwhile, manufactured exports have tripled since 1980. Mexican merchandise trade statistics do not include maquiladora imports and exports; instead the value added through these processing operations is recorded under Mexican service exports. Maquiladora value added grew sharply in the 1980s, from $0.8 billion in 1980 to over $3.0 billion in 1990.

On the import side of the Mexican trade accounts, intermediate goods are the dominant component of merchandise trade (table 3.3). If, as expected, Mexican policy reforms continue to pay off in terms of larger domestic investment in the 1990s, capital-goods imports should grow sharply.


The Macroeconomic Effects of a NAFTA

Former Speaker of the House Thomas P. "Tip" O'Neill was fond of proclaiming that "All politics is local." In that spirit, the local repercussions of a nafta have already sparked heated debate: How will it affect the broom industry in Iowa or the citrus growers in Florida? What will be the consequences for sewage disposal in Nogales, Arizona, and Nogales, Sonora? Will it exacerbate "midnight dumping" of hazardous wastes at unsupervised Mexican landfills? In contrast with the impact of a multilateral tariff cut, which spreads more or less evenly across the vast reaches of the US economy, establishment of a free trade area sharply affects the profile of fewer activities.

-47-

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North American Free Trade: Issues and Recommendations
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface xi
  • Board of Directors xiv
  • Acknowledgments xv
  • I - The Political Eonomy of a NAFTA 1
  • 1 - Nafta: Overview and National Objectives 3
  • 2 - The Substantive Agenda and Implications for Nonmember Countries 23
  • II - Economic Implications 45
  • 3 - Trade Effects of a Nafta: a Survey 47
  • 4 - Investment 71
  • 5 - The Maquiladora Phenomenon 91
  • 6 - Labor Issues 107
  • 7 - Environmental Questions 131
  • 8 - Rules of Origin 155
  • 9 - Intellectual Property Issues 173
  • III - Sectoral Analyses 183
  • 10 - Energy 185
  • 11 - Automobiles 209
  • Appendix - Motor Vehicle and Parts Manufacturers in Mexico 234
  • 12 - Steel 243
  • 13 - Textiles and Apparel 263
  • 14 - Agriculture 279
  • 15 - The Mexican Financial System 305
  • IV - Summary and Conclusions 327
  • 16 - Summary and Conclusions 329
  • References 345
  • Index 361
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