加拿大代写：NAFTA and the impact on Mexico

下面为大家整理一篇优秀的assignment代写范文- NAFTA and the impact on Mexico，供大家参考学习，这篇论文讨论了北美自由贸易协议对墨西哥的影响。为了更好地促进贸易，美国、加拿大及墨西哥在1992年签署了北美自由贸易协议，而这项政策对墨西哥的经济产生了巨大的影响。最直接的影响就是墨西哥的国内生产总值。由于墨西哥高度依赖出口，而墨西哥的出口大部分都在美国，所以墨西哥经济严重依赖美国经济。

1. Introduction

This paper will analyse the impact of the North American Free Trade Area (NAFTA) on the developing country Mexico. The NAFTA was signed by President George H. W. Bush in 1992 and signed into law by President Clinton in 1993. Finally, it came into effect on January 1st, 1994. It is an act that allowed countries to eliminate tariffs and nontariff barriers. The history of the act could date back to 1985 when the US signed a free trade agreement with Israel and with Canada in 1989. When the US added Mexico to this free trade agreement, it became the NAFTA. The act allowed each country to keep their own individual policies outside the free trade region. According to Article 102 of the NAFTA agreement, the purpose of the agreement was to better facilitate the trade between countries by eliminating barriers, enhance fair competition, increase investment opportunities, protect intellectual property rights, and to create resolution to trade disputes. Mexico, as the most under-developed country compared with the US and Canada, has seen changes after this policy. However, whether the policy is useful and if so, to what extend is it useful to the Mexican economy is the aim of this study.

This policy has a huge impact on the Mexican economy because Mexico’s northern neighbour is the US, which is the most developed country in the world. As we have learned in class, trade is one of the primary drivers for development because through trade, nations can export the products that they have a comparative advantage for producing and import products that will be costlier for them to produce. When countries trade, they will all benefit because they will be able to consume new and a more diversified pool of products. History has showed us how nations will be behind the world when they do not trade, for example, China before the Qing Dynasty or North Korea now. No nation can thrive if it chooses to live in isolation in such a globalized economy nowadays. Mexico’s geographical convenience allowed it to trade with the most powerful and economically development country in the world due to its close vicinity is certainly a great opportunity for it to develop economically.

2. Connecting the Policy to the Economics of Development

The most direct impact for this policy would be on the import and export figures that make up the GDP for Mexico. The indirect impact would be the change in GDP due to the change in net exports. As we learned in class, GDP is the fundamental factor in determining the economic state and growth rate for a country. Net exports, as one of the four sections in GDP, is important enough to make huge impacts on the GDP and the overall economy for Mexico. So this paper will analyse the change in GDP, per capita GDP and the net export as a percentage of GDP to evaluate the policy’s impact. (Perkins, Radelet, & Lindauer, 2013)

The second impact that this trade policy can have is on the exchange rate for the Mexican pesos. This paper will analyse the exchange rate movement between the Mexican pesos and USD. Even though the exchange rate movement can be attributable to many other reasons and it is hard to say what percentage of the change is due to the trade policy impact, one cannot deny impact on exchange rate generated from international trade. A strong currency can send the signal that a country’s economy is doing well. At the same time, a stronger currency can make the exports for a country relatively more expensive to products from other countries and less people will be willing to buy from that country. A trade deficit will occur in this case such as what the USA has exhibited for many years. I will measure the exchange rate between the peso and dollars to see this impact.

The third economic concept this paper will analyse is unemployment rate, especially in the agricultural sector because that is an industry that is hugely influenced by this trade policy. As learned in class, exports can generate more jobs for the country because new employees will be needed to produce more of this product to sell it to other countries. However, the negative impact will be that imports will reduce the number of people employed for other sectors and industries. So the overall impact on unemployment rate is uncertain when there is more trade for a country. I will analyse the unemployment rate for the overall nation and break down into specific industries to see which industry is impacted the most.

3. Impact Assessment

The Mexican economy is heavily dependent on the US economy because Mexico relies highly on exports while 80% of its exports go to the US. Of course, the change in the economy from 1994 and onwards cannot all be attributed to the impact of the NAFTA because other factors that had happened over the years have also influenced the economy. Even though it is difficult to study the impact of NAFTA alone on the economy, the following measures will give us some idea of what free trade brought Mexico.

Mexican GDP and growth rate

GDP has increased steadily over the years since the 1980s apart from the financial crisis in 2008. The growth rate of GDP averaged to be about 2% except for the financial crisis and the crisis in 1994 related to currency. I will analyse that part in further details in the “exchange rate” section.

Per capita GDP

The per capita GDP also showed a steady increasing trend except for the financial crisis period. The period where it exhibited the highest growth rate is between 1995 to 2000. However, exactly how much of the growth is attributable to the act is also difficult to tell from this graph.

Imports VS export graph

The imports and exports amount definitely started to see an increasing trend after 1994 while before 1994, it stayed relatively constant. Apart from the financial crisis, the imports and exports level had been increasing. We can also see that before 1994, exports tend to be higher than imports. Then after the act, imports started to catch up and had consistently surpassed exports from 2000 and onwards.

Two years before the act was in effect, the percentage for trade was at the lowest level. It started to pick up after the trade was in effect and saw the biggest jump in percentage in 1995. Now Mexico’s GDP is heavily dependent on trade because it consisted of more than 60%.

Exchange rate

As shown by the graph, the Mexican peso has depreciated steadily in the 1990s and this helped Mexico to increase some of its exports because it will be cheaper for other countries to buy products from Mexico. In the year 1994, immediately after the NAFTA was brought into effect, the government still adopted a fixed exchange rate policy. However, during that year, the peso was overvalued and the current account deficit widened, causing a decrease in foreign exchange reserves and investment. The government adopted a floating exchange rate regime instead. The country was brought to recession after the currency crisis. From then on, the Mexican government adopted a tighter monetary and fiscal policy to prevent future crisis such as this one. Exactly how much of this fluctuation in currency is due to the NAFTA or how much has NAFTA has helped Mexico to get out of the recession is hard to quantify even though this event happened right after the implementation of the act. Economists say that the NAFTA is actually beneficial because it helped improved consumer’s confidence and contributed to Mexico’s recovery from the recession.(Villarreal, 2008)

The long term effect was not good either because apparently the US economy and currency developed to be ever stronger, making the Mexican peso to depreciate even further relative to the USD in the most recent years. The act certainly did not help Mexico’s economy to a level that can rival that of the US.

Unemployment rate

The unemployment rate in Mexico is not looking promising. In 1995, immediately after the act was effective, it soared to a historical high of 7%. Even though it started to go down since then, the overall trend was still increasing and the Mexicans are not better off than they were in 1991. In 2002, the US passed the Farm Bill to subsidize the US agricultural industry by means of providing up to 40% of a farmer’s net income. The result is that it became much cheaper for the farmers to produce in the US. Without trade barriers, Mexicans can import corn and other grains from the US at a much lower cost. As a result, Mexican farmers cannot compete to produce at a lower cost and turns to import those from the US, causing many Mexican farmers to lose their jobs. In 2001, subsidies to Mexican farmers reduced to 13%, making the US even more competitive in producing corn. (Santos, 2015)

Even though this graph showed that the percentage of employment in agriculture has decreased,one cannot draw the conclusion that the NAFTA decreased employment in the agricultural industry in Mexico. The decrease in percentage could signify that with more technological development, we need less human labor to do the same amount of work. Or it can mean that Mexico has decreased its agricultural output and shifted to other sectors such as services or manufacturing. Even though it is true that agricultural employment has decreased, it is hard to measure exactly how much of the decrease is attributable to the NAFTA policy.

Of course, apart from the three aspects analysed above, the impact also extends to other factors such as environmental concerns, transportation problems, infrastructure building and government spending as a result of this policy. Due to the limitations for this paper, those aspects could be potential areas for further study.

4. Conclusion

The first proper conclusion that can be drawn from this study is that various factors affected the economic development in Mexico from the 1990s to now and that we can never attribute all of the growth or decline in the economy to only one single policy. Second, I conclude that even though trade has increased the Mexican GDP, its per capita GDP, and the Mexican economy is more reliant on trade as the years gone by, only a portion of this phenomenon can be explained by the NAFTA and other government regimes and policies had definitely played a role in this. Third, by looking at the exchange rates, I conclude that even though the Mexican economy has been growing steadily, it still has a lot to catch up with the US economy and that the act did not narrow the gap between the US and Mexico. Fourth, the agricultural industry is definitely hurt by the policy to some degree due to more agricultural imports from the US.

In conclusion, exactly how much has the NAFTA affected the Mexican economic growth is hard to measure. While some aspects were definitely improved by this policies, other regions and industries had suffered loss. Overall, the policy must have been adding more value to the economy than its negative effects because the government would have done something to stop this policy from working had the negative consequences really surpassed the gains.

Reference

Gould, D. (1998). Has NAFTA changed North American trade? Federal Reserve Bank of Dallas, Economic Review. Frist Quarter, 12-23. http://www.dallasfed.org/assets/documents/research/er/1998/er9801b.pdf

Perkins, D., Radelet, S., & Lindauer, D., (2013). Economics of Development, 7th Edition, Norton Press.

Santos, A. (2015, February). NAFTA at 20: North America's Free-Trade Area and Its Impact on Agriculture. United States Department of Agriculture, Economic Research Service. WRS-15-01. http://www.ers.usda.gov/media/1764579/wrs-15-01.pdf

Villarreal, M. & Cid, M. (2008, November 4). NAFTA and the Mexican Economy.CRS Report for Congress. http://fpc.state.gov/documents/organization/112402.pdf

Villareal, M. & Fergusson, I. (2015, April 16). The North American Free Trade Agreement (NAFTA).CRS Report for Congress.

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