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NAFTA - Assessing Economic Impact

            This January of 2014, the North American Free Trade Agreement (NAFTA) had its twentieth anniversary of existence. The treaty marked a fundamental change in the global trade scheme. Back in the day, it was the world's largest free trade area. The agreement was also groundbreaking as it was the first comprehensive free trade agreement between a developing country and developed ones. While the magnitude of the change brought by this agreement on Mexico is not up to debate, the debate on its' economic impact is still alive. On this paper I will contribute to that debate by examining the impact NAFTA had on Mexico's trade & investment flows, its' GDP (economic) growth, as well as on other well being indicators.
             While NAFTA was signed in 1992, the negotiations preceded the administrations which signed it. NAFTA was just the outcome of a regional liberalization process which had started to take form in 1986. That year Mexico joined the General Agreement on Tariffs and Trade (GATT), while the United States and Canada started negotiations for a free trade area1. Mexico was already dismantling trade barriers, as result of the GATT Mexico's top tariff fell from 100 percent to 20 percent and the average tariff fell to 10 percent2. Increased trade and integration with the United States would have occurred, and was already occurring, with or without it. .
             The North American Free Trade Agreement aimed to eliminate tariffs and reduce non tariff barriers amongst it members. Given Mexico's tariffs were higher than those of its partners (US tariffs on Mexican products averaged 2 percent in 19933), it would experience the largest reductions. To buffer the relatively larger change Mexico was given a preferential tariff advantage, postponing the elimination of some of its' tariffs for some years. This concession pales in comparison to the financial assistance to developing nations within the European Union, paid by its developed members.

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