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1
The Mexican Experience with NAFTA
University of Texas
LBJ School of Public
Affairs
Francisco J. Alejo
Consul General of Mexico
October 22, 2003
2
Contents I. Introduction
The Context of NAFTA
1. Accelerated Globalization
2. Mexico/ USA: An Asymmetrical Relationship
3. The Transformations of Mexico
II. Mexican Experience with NAFTA
1. Economic Performance, Trade and Investment
2. The Pending Agenda
3. Lessons and Policy Implications
4. Conclusions
3
I. Introduction
The Context of NAFTA
4
I. Highlights of the Globalization 1
1. Along the last several years, until the end of 2001, global trade grew at about three times the rate of OCED economies, surpassing $7 trillion in cross-border movement of goods and services.
2. Foreign direct investment (FDI) grew even faster than international trade and actually surpassed $1 trillion in flows in 2000
1. Based on: Earl H. Fry, “North American Integration. Policy Options”, CSIS, Policy Papers, July 2003
5
3. The number of multinational corporations (MNC’s) in the World also expanded dramatically, from 7000 in the 1960’s to roughly 65,000 today.
3. The 65,000 MNC’s control 850,000 affiliates, which employ 54 million workers world wide and were responsible for producing $19 trillion in annual sales in 2001, almost three times the aggregate value of global international trade.
6
5. International currency transactions amount to approximately $1.5 trillion per day. Production sharing systems and stock markets constitute a 24 hour phenomena conducted by continuous, computerized automatic systems.
6. In spite of September 11, 2001 events, international tourism returned to record levels in 2002 with 715 million people spending over $460 billion
7
7. Immigration and refugee flows are also without parallel, and at least 175 million people currently reside in countries different from their place of birth.
8. The number of transactions through internet-crisscrossing the planet is astronomical and grows at a maddening pace.
8
I.2. Mexico/US: An Asymmetrical Relationship
1. The US continental land mass is equivalent to roughly 4.5 times to that of Mexico. The population of the former is almost 2.8 times more than the 100 million Mexicans living in Mexico.
2. The Mexican GDP is equivalent to one sixteenth of the US corresponding GPD. A 6.5% annual growth of the US economy aggregates additional production equivalent to the total Mexican GDP, even though the latter ranks between the 9th and 10th largest in the world.
9
3. After almost 10 years of NAFTA, 85% of total Mexican exports are aimed at the US economy and constitute 20% of the country’s GDP. Nearly half of the 3 million new jobs created in Mexico between 1993 and 2000 were export related. In contrast, 37% of total US exports are destined to the NAFTA partners, and contribute with only 4% of the US aggregate GDP and employment. US commitments as a global superpower increasingly spread out all over the planet.
10
4. The growing size of the US economy, its global corporations, and the need to keep a large global techno military edge, justifies a gigantic and unbeatable investment in science and technology.
5. In the case of Mexico, in contrast with Canada, there are also very important asymmetries in education, cultural and institutional development.
11
6. Of special and paramount importance are the asymmetries in physical and telecommunications infrastructure.
7. It was precisely because of the fundamental role of the asymmetries that the European Community assigned a pivotal role in the achievement of European integration to the special funds for balancing the levels of basic development among the member nations.
12
I.3 The Transformations of Mexico
1.Demographic Transformation: from 20 million inhabitants in 1950 to 100 million 2000.
2. Settlements transformation: from 80% rural population to 75% urban population in only 60 years. With only one city with more than one million inhabitants to one megalopolis with 18 million inhabitants, two cities with more than 3 million and ten cities with more than one million inhabitants in the year 2000.
13
3. Educational Transformation: from more than 70% illiteracy level to more than 90% literacy, to almost 100% coverage by the elementary school system and to almost two thirds coverage by the high-school system in only two generations.
4. Economic Structure Transformation: from a dominantly agricultural and mining rural economy to an essentially industrial and service urban economy in only 30 years from 1950 to 1980.
14
5. Trading Transformation: from a tightly closed economy, with more than 90% of the importation code subject to “previous specific permit” by the government and an average customs tariff of more than 80% by 1982 to less than 5% of the code subject to previous prermission and maximun customs tariff of 20% and a weighted average tariff of less than 10% by 1990.
After signing free trade agreements with Chile and the United States in the early 90’s, Mexico has signed such treaties with more than 30 countries. No other country has signed so many.
15
6. Public/Private sectors roles Transformation: from an economy tightly controlled and dominated by the public sector (the public sector expenditure represented 48% of the GDP in 1982 and there were more the 1200 corporations fully or mostly owned by the federal government) to a highly decentralized economy with only a bundle of state owned corporations and public sector expenditures representing a maximum of 22% of GDP. The process of deregulation has encompassed almost all sectors of economic activity.
16
7. Democratic Transformation: from a highly centralized and one hegemonic party system that lasted for more than half a century to a multiparty, highly reliable and competitive political system in only 22 years. This comprised new legislation for political parties in 1978, new polling legislation in 1978, 1987 and 1995; a judiciary system for dealing with post polling disputes in 1995 and 1998; a massive transfer of financial resources from federal to state and local governments took place between 1995 and 2002; a new legislation on transparency and accessibility to public records and information as an indisputable right for citizens and the media.
17
8. Human Rights Transformation: constitutional reforms and new legislation allowed for a new autonomous regime for the 10 million members of the indian communities of the country and the establishment of a fully independent national commission as a watchdog for human rights plus the subscription to the Inter-American and United Nations Human Rights treaties.
18
II. The Mexican Experience with NAFTA 2
2/ Based on: Aldo Flores Quiroga, “The North American Free Trade Agreement…”, Secretaria de Relaciones Exteriores, Mexico, Agosto, 2003.
19
1. Substantial increase in trade and investment, with a positive impact on economic growth and job creation
2. Lower vulnerability to foreign shocks, except for those that have originated in the US economy.
3. Productivity increases associated with technology transfers
4. Stable and credible legal framework for the solution of trade controversies
Four favorable outcomes for Mexico stand out during NAFTA’s first 10 years
20
1. Integration of productive chains
2. Expand physical, financial, and informational infrastructure, especially at the borders
3. Create compensation funds to promote regionally balanced growth
4. Improve existing mechanisms for conflict resolution
5. Develop intelligent borders for the flow of goods, services, knowledge and people
Much more, however, needs to be done:
21
Contents
I. Economic performance, trade and investment
II. The pending agenda
III. Lessons and policy implications
IV. Conclusions
22
A. Macroeconomic convergence
1. Inflation rates
2. Interest rates
3. Exchange rate
4. Country risk
5. Production
23
Mexican inflation is converging toward the US and Canadian rates…
Annual inflation rates, Mexico, United States and Canada
Source: INEGI
02468
101214161820
1999/021999/041999/061999/081999/101999/122000/022000/042000/062000/082000/102000/122001/022001/042001/062001/082001/102001/122002/022002/042002/062002/082002/102002/122003/022003/042003/06
4.3%
Mexico
United States
2.1%Canada2.6%
24
…gradually contributing to interest-rate convergence between Mexico and the United States
Interest rates, Mexico and United States (One month certificated deposits)
Source: INEGI
0
5
10
15
20
25
30
35
1999/021999/041999/061999/081999/101999/122000/022000/042000/062000/082000/102000/122001/022001/042001/062001/082001/102001/122002/022002/042002/062002/082002/102002/122003/022003/042003/06
5.18%
Mexico
United States
1.22%
25
7.5
8
8.5
9
9.5
10
10.5
11
11.5
30/0
6/1
998
30/1
0/1
998
28/0
2/1
999
30/0
6/1
999
30/1
0/1
999
29/0
2/2
000
30/0
6/2
000
30/1
0/2
000
28/0
2/2
001
30/0
6/2
001
30/1
0/2
001
28/0
2/2
002
30/0
6/2
002
30/1
0/2
002
28/0
2/2
003
30/0
6/2
003
The Mexican peso has weakened but its volatility is relatively low
Interbank Foreign Exchange Rate
(MXP/USD)
Source: Banco de México
10.93
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
30/0
6/1
998
30/1
0/1
998
28/0
2/1
999
30/0
6/1
999
30/1
0/1
999
29/0
2/2
000
30/0
6/2
000
30/1
0/2
000
28/0
2/2
001
30/0
6/2
001
30/1
0/2
001
28/0
2/2
002
30/0
6/2
002
30/1
0/2
002
28/0
2/2
003
30/0
6/2
003
Average daily volatility in the foreign exchange market
(% daily apreciation or depreciation)
Source: SRE with Banxico´s data
26
Country risk has differentiated from other Latin American markets
Country risk(Emerging Markets Bond Index EMBI+, JP Morgan)
Source: JP Morgan
0
200
400
600
800
1000
1200
1400
1600
28/05/1999
28/08/1999
28/11/1999
28/02/2000
28/05/2000
28/08/2000
28/11/2000
28/02/2001
28/05/2001
28/08/2001
28/11/2001
28/02/2002
28/05/2002
28/08/2002
28/11/2002
28/02/2003
28/05/2003
Latin America
EMBI+Mexico
27
1400
1450
1500
1550
1600
1650
1998/01
1998/02
1998/03
1998/04
1999/01
1999/02
1999/03
1999/04
2000/01
2000/02
2000/03
2000/04
2001/01
2001/02
2001/03
2001/04
2002/01
2002/02
2002/03
2002/04
7800
8000
8200
8400
8600
8800
9000
9200
9400
9600
9800
Mexico’s GDP performance is closely associated with variations in US GDP
Quarterly GDP, Mexico* and USA**(seasonally adjusted series)
Source: INEGI
Mexico(left scale)
United States(right scale)
* Billions of pesos of 1993** Billions of dollars of 1996
Correlation coefficient: Correlation coefficient: 97%97%
28
This close correlation is due to the deepening integration of US and Mexican industrial sectors
Industrial production (annual % variation, three month moving average)
Source: INEGI
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1998/03
1998/06
1998/09
1998/12
1999/03
1999/06
1999/09
1999/12
2000/03
2000/06
2000/09
2000/12
2001/03
2001/06
2001/09
2001/12
2002/03
2002/06
2002/09
2002/12
2003/03
2003/06
Canada
USAMexico
Correlation coefficient: Correlation coefficient: 97.2%97.2%
29
B. Trade and investment
1. Trajectory and reallocation of trade flows in the North American area
2. Mexican participation in the US market
3. Long and short term capital flows into Mexico
30
4%
7%
1%0%
76%
2%
10%
2002
4%
7%
0%0%
78%
2%
8%
2001
3%6%
0%0%
81%
2%
6%
2000
3%7%0%0%
82%2%5%
1999
United States
Source: INEGI
Performance
Period % var
1999-00
23.91
2001-02
1.18
Total trade (MD)
Period Level
1999 273,915.8
2000 339,415.2
2001 325,506.5
2002 329,360.5
Seventy-six percent of Mexico’s total trade is oriented toward the United States
Africa and the Middle EastEaster
n Europe
Western Europe
Latin America and the Caribbean
Asia
Canada
31
4%
3%0%0%
89%
2%2%
2002
4%
4%0%0%
89%
2%1%
2001
4%4%0%0%
89%2%1%
2000
4%4%0%0%
89%2%1%
1999
Exports shipped to United States represent 90% of the Mexico’s total sales abroad
Source: INEGI
United StatesMexican total exports (MD)
Period Level
1999135,75
2
2000166,06
6
2001158,26
4
2002160,68
2Performance
Period % var
1999-00
22.3
2001-02
1.5
Africa and the Middle EastEaster
n Europe
Western Europe
Latin America and the Caribbean
AsiaCanada
32
4%
10%
1%0%
63%
3%
19%
2002
3%
10%
1%1%
68%
3%
15%
2001
3%
9%0%1%
73%
2%
11%
2000
2%10%0%1%
76%2%
9%
1999
Sixty three percent of the Mexican imports come from the United States
Western Europe
Latin America and the Caribbean
Asia
Canada
Eastern Europe
Africa and the Middle East
United States
Performance
Period % var
1999-00 25.47
2001-02 0.75
Mexican total imports (MD)
Period Level
1999138,318
.8
2000173,552
.9
2001167,425
.3
2002168,678.7
Source: INEGI
33
Since 1994 Mexican exports have expanded notably and are more concentrated in the manufacturing sector
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Manufactures
Mining
Agriculture
Petroleum
Total Mexican exports (billions of dollars of 2002)
Source: SRE with INEGI data
NAFTAGATT Accession $160.7
88%
9%67%
20%
$32.6
Growth 1993-2002:149%
Growth 1985-1993:80%
34
Imports have also increased, driven primarily by the demand of intermediate goods
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Consumptiongoods
Intermediategoods
Capital goods
Total Mexican imports (billions of dollars of 2002)
Source: SRE with INEGI data
NAFTAGATT Accession $168.
7
75%
12%61%
27%
$40.7
Growth1993-2001:107%
Growth 1985-1993:237%
35
Intra-regional trade(billions of dollars)
NAFTA has thus produced a significant trade expansion for the US, Mexico and Canada
289339
375418
475512
568
659615 604
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Source: SRE with USDOC, Statistics Canada and INEGI data
North American trade integration 1993-2002:
1. Trilateral trade increased 109%
2. Mexico’s participation in intra-regional increased from 15% to 20%
3. Last year’s trade decline is due to the sluggish performance of the US economy
36
Mexico is the second trade partner of the United States...
211
85
155
40 48 48
370
173
147
8974
232
0
100
200
300
400
Canadá
Mexic
o *
Japan
Chin
a
Germ
any
Unite
dKin
gdom
1993
2002
Main US trade partners(total trade, billons of dollars)
Source: Ministry of the Economy with USDOC data
Participation of Mexican products in the US market (%)
6.36.6
6.9
7.5
8.3
9.2
9.9
10.410.7
11.211.5 11.6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
NAFTA start date
37
30.1
39.5
47.9
45.3
100.1
50.9
52.2
51.4
97.47
160.9
0 50 100 150 200
China, Singapurand Hong Kong
France andUnited Kingdom
Japan
Mexico*
Canada
2002
1993
…and it is the second largest export market for the US
US exports(billions of dollars)
Source: Ministry of the Economy with USDOC data
38
United States is the main investor in Mexico
* Excludes the Banamex-Citigroup transactionSource: Ministry of the Economy
Foreign Direct Investment(billions of dollars, cumulative 1994-2002: 112.4 bd)
3.5
5.5
7.5
9.5
11.5
13.5
15.5
1994
1995
1996
1997
1998
1999
2000
2001*
2002
TOTAL USA
39
C. NAFTA’s impact by sector
1. Agriculture
2. Manufacturing
40
Reciprocal tariff eliminations helped Mexican exporters increase their participation in the US market…
* Includes the January-October
Mexican agricultural exports to the United States
Product
Millions of dollars
TCPA
1993
2001
1993-
2002*
Berries 0.22 21.24
69.6%
Beans (dehydrated)
0.02 1.07 66.5%
Tamarind 0.15 4.57 44.5%
Avocado 3.63 39.45
36.5%
Vegetable (mix) 3.75 32.77 27.6%
Papaya 5.38 40.74
23.1%
Mango 0.76 5.74 25.3%
Oranges 0.67 4.79 30.9%
Turnip 0.03 0.19 18.2%
Leek 0.75 4.25 18.4%
Product
Millions of dollars
TCPA
19932001
1993-2002*
Broccoli 6.68 35.95
18.70%
Pineapple 1.46 6.89 20.28%
Esqueje 1.80 8.01 15.93%
Corn (sweet) 2.94 12.62
16.89%
Pepper 4.77 19.97
16.38%
Fresh Flowers 4.92 19.49
16.07%
Artichokes 0.21 0.75 15.85%
Cabbage 2.08 7.39 15.41%
Chickpea 7.07 25.08
11.33%
Spinach 1.48 5.23 11.96%
Source: Ministry of the Economy
41
…placing them among the main suppliers of a diverse set of goods in the US market
* January-October
Mexican agricultural goods in the US market
ProductParticipation in the US market
1993 2001 2002*
Avocado 3.6 21.6 32.7
Garlic 48.1 43.2 28.4
Onion 81.2 74.0 73.3
Chickpea 61.8 75.0 44.5
Corn (sweet) 0.0 94.1 93.0
Mango 25.0 90.3 89.0
Turnip (fresh) 11.7 52.9 88.7
Okras 0.0 96.9 98.3
Papaya 70.6 74.0 68.4
Pepper 0.0 99.2 99.6
Tomato 91.7 67.2 67.7
Carrot 13.5 23.8 29.4
Source: Ministry of the Economy with USDOC data
42
NAFTA has benefited Mexican consumers by fostering competition among suppliers, thereby lowering the prices of many goods
Prices of staples in the
average Mexican diet
has declined
ProductRelative prices change 1994-
2001 (%)
Pineapple 6.4
Lettuce -0.5
Chickpea -8.5
Grape -11.0
Garlic -14.8
Carrot -15.1
Papaya -16.4
Melon -20.4
Mango -21.5
Corn (sweet) -25.0
Tomato -34.0
Onion -34.8
Oranges -36.4
Grapefruit -41.5Source: Ministry of the Economy
43
Mexico’s manufacturing sector has also been a beneficiary of NAFTA, through greater exports and lower consumer prices
Exports to the USA and
Canada of manufactured
products
ProductsTCPA1994-2001
Electrical and electronic devices, machinery and equipment
22.3%
Textiles and cloths 21.2%
Auto-motors 21.0%
Auto-parts 12.8%
Steel Industry 12.4%
ProductsRelative price
change*1994-2001
Electrical devices -14.9%
Electronic devices -19.9%
Automotives -16.0%
Auto-parts -3.3%
Real price change of
manufactured products
Source: Ministry of the Economy
Positive export
performance due to NAFTAReal price decrease
44
NAFTA success stories
Output in sectors with significant backward and forward linkages has increased
Sector
Annual exports (million dollars)
Mexican total
exports (share, %)
Jobs created
since NAFTA
Market share in USA (%)
Automotive sector
33,000 21% 200,000 15%
Electrical and electronic sector
56,000 36% 351,000 19%
Textile and cloths sector
11,000 7% 500,000 12.4%
Source: Ministry of the Economy
45
D. Effectiveness of Mexico’s free trade agreements
1. Evolution of Mexican exports
2. Performance of Mexican imports
46
Mexican exports to the United States, Costa Rica and the G3 have increased notably since the launching of the respective FTAs…
0
100
200
300
400
500
600
Source: DGREB con datos de INEGI
Exports (Index based on real exports, constant dollars of 1990, semiannual moving average)
EUA
Costa Rica
G3
Canadá
Time to double sales
Country Months
Costa Rica 15
USA 33
G3 5
Chile 38
Canada n.d.** Not duplicated
Time to triple sales
Country Months
Costa Rica 41
USA 76
G3 74
Chile 39
Canada n.t.** Not tripled
Chile
Number of months after FTA
47
0
50
100
150
200
250
300
Source: DGREB con datos de INEGI
Unión Europea
NicaraguaBolivia
Uruguay
…but exports to Bolivia and Nicaragua, with whom Mexico also has FTAs, have not grown significantly
Time to double sales
Country Months
Bolivia 19
Nicaragua
23
E.U. n.d.
Northern Triangle
n.d.
Uruguay n.d.
* Not doubled
Triángulo del Norte
Exports (Index based on real exports, constant dollars of 1990, semiannual moving average)
Number of months after FTA
48
The FTAs with Chile and Costa Rica have generated a substantial increase in Mexican imports from them…
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Source: DGREB con datos de INEGI
Costa Rica
Time to doubled purchases
Country Months
Costa Rica 6
Chile 11
Time to triple purchases
Country Months
Costa Rica 12
Chile 14
Chile
Imports (Index based on real imports, constant dollars of 1990, semiannual moving average)
Number of months after FTA
49
…just like the FTAs with the United States, Canada, Venezuela, Colombia, Guatemala, Honduras and El Salvador
0
50
100
150
200
250
300
350
Source: DGREB con datos de INEGI
EUA
Nicaragua
G3Canadá
Time to double purchases
Country Months
Nicaragua 13
Canadá 69
G3 79
USA 65
Uruguay n.d.Time to triple
purchases
Country Months
Nicaragua 13
Canadá n.t.
G3 n.t.
USA n.t.
Uruguay n.t.
Uruguay
TN
Imports (Index based on real imports, constant dollars of 1990, semiannual moving average)
Number of months after FTA
50
The trend in imports from Bolivia and Israel, however, has not changed with the FTAs
0
20
40
60
80
100
120
140
160
Source: DGREB con datos de INEGI
UEBolivia
Time for a 50% increase
Country Months
Northern Triangle 2
E.U. N.A.
Bolivia N.A.
Israel N.A.* Not reached
Time to double purchases
Country Months
Northern Triangle n.d.
E.U. n.d.
Bolivia n.d.
Israel n.d.* Not doubled
Israel
Imports (Index based on real imports, constant dollars of 1990, semiannual moving average)
Number of months after FTA
51
Contents
II. The pending agenda
III. Lessons and policy implications
IV. Conclusions
I. Economic performance, trade and investment
52
A. Low domestic-content integration of Mexican products
1. Relevance of the in-bond sector for manufacturing exports
2. Low domestic-content of goods produced in in-bond plants
53
The in-bond industry generates more than 50% of manufacturing exports…
Source: SRE with INEGI data
Mexican exports of manufactured goods(constant billion dollars of 2000)
19 22 27 29 33 3948
6069
80 79 7518 20
2427
3845
52
59
63
66 6662
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
In-Bond Industry Other
37 41.3
50.6
70.883.8
100
132
146 13
7119
56.4
54.5%
45.5%
49.9%
50.1%
145
54
…but it uses very few domestic components…
Source: SRE with INEGI data
In-bond industry inputs(billions of pesos of 2002)
181 186 212250
372431 465
507 527563
514 513
1416
18
19 20
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Imports Domestic
184
189
216
378
440475
543580
533
521
25496.3%
3.7%533
55
Contents
II. The pending agenda
III. Lessons and policy implications
IV. Conclusions
I. Economic performance, trade and investment
56
1. Mexico’s unilateral trade liberalization that took place during the late 1980’s was too fast, too abrupt and without being accompanied with appropriate promotional and supporting policies as well as the necessary sequencing of such policies as to avoid excessive destruction of productive industrial chains and linkages as in effect happened.
2. By the time the NAFTA was enacted, beginning in 1994, a large proportion of previously existing productive chains in the country’s manufacturing industry had been obliterated by foreign competition.
Lessons
57
3. Free trade cannot address every development problem -it is just one instrument among many in the policymaker’s tool kit
4. Productivity increased by time requires continuous technological innovation and expansion of human capital
5. Export promotion alone does not guarantee the integration of productive chains
58
1. Implement domestic policies to redistribute incomes between the north and the south of the country, which implies the reduction of differences in productivity levels.
2. Consider the establishment of cross-border, social-cohesion funds to help balance the development process and provide adjustment assistance: the leveling out of availability and quality of physical and telecommunications infrastructure, a drastic reduction in the “digital divide”, and the expansion and spreading of human capital.
Implications: A few examples
59
3. Create an environment that favors continuous productivity increases
a. Invest more in education and training
b. Improve production processes
c. Modernize physical and financial infrastructure
d. Promote technology transfers
4. Seriously consider the possibility of “NAFTA plus” with structural adjustment assistance funds, a customs union, a common market including labor or even EU-style arrangements.
60
Contents
II. The pending agenda
III. Lessons and implications
IV. Conclusions
I. Economic performance, trade and investment
61
1. Free trade has yet to benefit the Mexican south and that is essentially dependent on appropriate development policies adopted by Mexico and development assistance provided by the other NAFTA partners.
2. Existing dispute settlement procedures have been insufficient to address notable trade controversies (cross-border transportation, agriculture), hence it is necessary to consider the creation of a North American Commission, a permanent North American Court on Trade and Investment that replaces the current NAFTA panels, and possibly even a North American Parliamentary Group.
Conclusions - The bad
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3. The absence of adjustment assistance funds slows down the process of factor reallocation and trade integration and the overall growth potential of the region.
4. Mexico’s growth has become excessively dependent on the dynamics of the US economy. It has to rely more on its own domestic and third international markets and keep in tune with the US economy’s pace of technological change.
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1. NAFTA provides a stable legal framework for the expansion of trade and investment
a. Significant increase in Mexican trade and benefits for the three parties involved.
b. Significant increase in FDI flows
c. Greater competitiveness of the manufacturing sector
2. NAFTA has helped to spur growth and job creation in Mexico
3. Mexico’s trade negotiating stance in world markets has improved because of NAFTA
Conclusions - The good