FOR MOST of the twentieth century U.S. foreign policy has focused on distant more than on neighboring countries. The United States has fought wars in Europe and Asia, and U.S. trade policy has been based primarily on relations with the European Community and Japan. But in recent years national attention started to shift toward the south, stimulated primarily by the 1973-74 oil crisis and the discovery of huge quantities of oil in Mexico. By the late 1970s, Mexico had become the third-ranking U.S. trading partner after Canada and Japan. The economic stabilization program that Mexico undertook in 1982 to correct its balance-ofpayments deficits led to a sharp decline in Mexican imports and to a loss of jobs in U.S. export industries. After peso devaluations in 1982 and 1983, the number of undocumented Mexicans crossing the long border to work in the United States increased substantially. Thus it became obvious to all observers that what happens in Mexico affects the United States, and vice versa.
Trade between the two countries is important in its own right and for its social and political implications. The structure of industries in both countries and their levels of income and employment are influenced by their trade with each other. Diplomatic relations between the two governments are dominated by trade issues.
This study is an analysis of the possibility that Mexico and the United States can move gradually toward free trade in substantially all goods. It examines the political impediments to such a movement, but it concentrates on economic issues, especially on whether the benefits of free trade would be shared equitably or would tend to favor the more advanced U.S. economy. In this connection, it is worth noting that in specific industries--such as steel, petrochemicals, automobile production and assembly--it is possible that by the year 2000 the United States