Effects of NAFTA on Mexican Foreign Trade

¶ … NAFTA and its affects on the Mexican foreign trade. The writer explores what NAFTA is and how it operates then outlines the way it impacts the Mexican foreign trade. There were six sources used to complete this paper.

NAFTA's Impact on Foreign Trade with Mexico

The North American Free Trade Agreement was put together in 1993 and provides agreed upon resolutions for its members when it comes to free trade boundaries and rules. The NAFTA allows its members to regulate things such as tariffs, import and export regulations and other issues that come up in the course of trade business between the nations. NAFTA had a positive impact on Mexico's free trade industry because it strengthened an already strong relationship between the United States and Mexico.

Several years before the NAFTA agreement went into place Mexico began working on its economic reforms to improve its trade business both locally and world wide.

Before the NAFTA was implemented Mexico joined another trade organization called the World Trade Organization WTO. It provided general agreements about tariff and trade among its members and encouraged business among its members (MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm)

Mexico also joined several other organizations as well. It joined in NAFTA with the U.S. And Canada in 1994 and it was a move that had a positive impact on the free trade of Mexico. Today Mexico is considered the seventh leading nation of trade in the entire world and it is the number one nation in Latin America.

In 2001, despite the global economic slowdown and the terrorist attacks of September 11, Mexico's foreign trade surpassed $326 billion. The nearly $159 billion in exports registered last year more than tripled the amount that were exported in 1993(MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm)."

When NAFTA went into place and included Mexico and Canada as well as the U.S., it essentially removed most of the previous restrictions regarding several things including the flow of business. Whether it was services, investments, or goods with loosened restrictions it became a positive experience for Mexico (Rokenbach PG). It has been considered by some experts as a major turning point in the process of integrating the trade relations between United States and Mexico (MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm).

Because Mexico and the United States have the largest mutual trade relationship in the world the economic success of those in NAFTA becomes very important. Research and history points to a continued strengthening of the relationship shared because of NAFTA not only between Mexico and the U.S. But Mexico and Canada as well. It is obviously helpful for the U.S. And Mexico to trade through NAFTA because of their close boundaries but the Canadian-Mexico trade business is stronger than it has ever been according to the numbers and the NAFTA created the stage for that to happen. The trade with Canada and Mexico has increased more than eight billion over the last eight years. Mexico has moved to the position of number one supplier of import goods for Canada since the implementation of NAFTA (MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm).

Through NAFTA, Mexico has consolidated its position as the second-largest trading partner of the United States. In 2001, bilateral trade exceeded $245 billion -- an increase of nearly 188% since 1993. On average, the United States and Mexico trade more than $1.7 billion every day. The United States' trade with Mexico has grown faster than with any other major U.S. trading partner, including China, Germany, Korea, and the United Kingdom. Mexican exports to the United States have grown twice as fast as those from the rest of the world. As a result, Mexico has increased its share of total U.S. imports from 6.8% in 1993 to 12% in May 2002(MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm)."

There are several other reasons that NAFTA has had a positive impact on the free trade business of Mexico as well. One of the most important things that NAFTA did for Mexico's free trade business was open the need for increased manufacturing. Because there was an agreement and through that agreement there have been constant increases in trade needs between Mexico and the other members it has meant an increased need for services and products. This translates to an increased job market as companies move to expand their workforce to meet the need. This goes across the board in what type of products and services are included as they all have to continue to grow for the purpose of providing enough for effective trade ability. This does not confine itself only to the actual manufacturing but also to those who have to package, ship and store the goods. It also affects those who work to import the goods from other member nations. The entire NAFTA process has increased many aspects of employment in the nation of Mexico.

In addition to the increased job opportunities the NAFTA provides additional advantages to Mexico (MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm).

One of those advantages is the improved reputation in the world. The ability to gain such clout and power with a nation as powerful as the U.S. provides Mexico with bargaining power in trade relations in other countries around the world. It is something that allows Mexico to flex its muscle when it needs or desires an agreement or a business deal with other nation and because the world knows how strong the Mexico-United States ties are other nations may work deals with Mexico hoping to gain favor by way of reference when it comes time for them to try and deal with the United States (Glick PG).

The benefit by association causes the world to view Mexico as part of the North American market more than ever. Before NAFTA the world tended to view Mexico as a Latin affiliate and only viewed America and Canada as North American countries. Since the inception and delivery of the NAFTA the world has increasingly been placing Mexico as part of North America for the purpose of business and free trade. This again boosts the reputation and power that Mexico enjoys with relations of other nations (MEXICO AND THE FREE TRADE AREA OF THE AMERICAS Mexico http://usinfo.state.gov/journals/ites/1002/ijee/ftaa-derbez.htm).