Mexico & Economic Liberalization after NAFTA

Introduction

The year 1994 saw the beginning of a new era in trade relations among the three major countries of North America. With the launch of North America Free Trade Agreement i.e., NAFTA, comprising of world’s two most powerful economies USA and Canada and Mexico, the whole economic situation of the region has become a matter of close observation. If the case of Canada and the USA is looked upon, there already exist a number of bilateral agreements on issues from defense, border security to trade and commerce. But from Mexican point of view, NAFTA has been much more than a simple regional trade agreement. Despite being a platform for boosting trade, participation of Mexico in NAFTA has been seen as the most effective tool to achieve two important missions.

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The first one has been for the purpose of directing the Mexican economy to an export-led growth path on a non-inflationary note. With the USA as the major economic partner, NAFTA has been seen by the Mexican government as a platform to initiate large-scale export to its much superior economic partner. Internal structure of the Mexican economy has also been made available on a platter to get a chance with new set policies ensuring free trade initiative and drastic reduction in terms of tariff and quota issues to promote intra-regional trade (Moreno-Brid, Validiva & Santamaria, 2005). The second objective of the above-mentioned reform process was to make the nature of this process very much irreversible. Though NAFTA accord has made sufficient provision so that any attempt to be made by the governments of future would cause the imposition of international legal and extra-legal constraints thereby deterring any attempt of returning back to the days of trade protectionism but the Salinas administration along with other supporters blunted all attack by its opponents to ensure the path of reform unruffled. The whole purpose of this treaty for Mexico was to make the nation a very lucrative region for the manufacture of products that can easily be exported to the USA (Moreno-Brid et. al., 2005).

Now it’s been more than a decade that NAFTA came into existence and if the economic condition of Mexico is viewed then the expectations that were raised by the Salinas govt. has actually been partially satisfied. The country has made considerable economic advancements and these things are visible through the era of small budget deficit, low inflation that followed the treaty. Also the export of non-oil products has reached a very high level with surge in Foreign Direct Investment (FDI). But euphoria associated with the treaty loses its charm when the number of jobs being created in the liberated economy is taken into account. The rate of growth of the GDP is still below the level which the economy had attained in days much prior to liberalization (Moreno-Brid et. al., 2005).

So, for Mexico, the outcome of being a part of NAFTA has been very limited. If the limited gains are compared with what had been expected before, the NAFTA will appear more as a failure than a success. In 1994 only, the possibility of this sort of result was predicted by eminent US political scientist Stephan Krasner. While depending on realist model Krasnar had clearly stated that though NAFTA is an excellent attempt to have a very beneficial regional agreement but from Mexico’s point of view it’s not going to yield any golden egg (Bromley, Mackintosh, Brown & Wuyts, 2004, p. 264). The extreme differences in the business culture and size of the economies of the US and Mexico will be a very important reason behind the limited success of the agreement and expecting a broad result of something like the one between the US and Canada can never be achieved.

The economic policy of the US has been more imperialistic in nature. This very US policy gives rise to anti-Americanism. This actually reduces the extent up to which both US and Mexico could have cooperated. This is very much in agreement with Waltz’s theory, which has clearly mentioned that the international condition is very much anarchic due to the lack of any common controlling authority giving rise to the issues like national threat and rise of conflicts of both military and economic nature (1979). As a result the apprehensions with rich nations fearing the rise of issues of illegal migration and human trafficking, the extent of cooperation between the two states will be very limited (Hollifield, 2006). The states would be found more concerned towards maintaining their relative power in relation to one another and at the same time will avoid any permanent loss to existing relationships (Bromley et. al, 2004, p. 278).

Summary

The much-analyzed theory of Waltz on International Relations valid in almost every case can be successfully used in understanding the case of NAFTA and Mexico. The history is full of differences and conflicts between the US and Mexico with Mexico in constant fear of losing its sovereignty. This fear and the bitterness of past has always been a very important reason the success of any pact between Mexico and the US. Even the economic policy of the US has widely been considered as imperialistic and Mexico had become a part of NAFTA for increasing its exports especially to the US, hence the Mexican establishment will always be under the influence of US economic policies and decisions and may have to modify its international economic and business policies to suit the US and the economic benefits Mexico is having with the trade with such a large neighbor (Bromley et. al, 2004, p 264). So the fear of the past was the invasion over geographical boundary with Mexico preferring Latin culture rather than the pro-US North American trend. Now becoming a very important part of North American economic group, Mexico is under continuous fear of losing its control over its economy and currency and might have to face economic colonialism.

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References

Hollifield, J. F. (2006). Trade, Migration and Economic Development: The Risks and Rewards of Openness [Online]. Web.

Moreno-Brid, J. Validiva, J. C. R. & Santamaria, J. (2005). Mexico: Economic growth exports and industrial performance after NAFTA, Economic Development Unit [Online]. Web.

S. Bromley, M. Mackintosh, W. Brown & M. Wuyts (2004). Making the International: Economic Interdependence and political Order. Pluto Press.

Waltz, K. N. (1979).Realist Thought and Neorealist Thesis 1979. Journal of International Affairs [Online]. Web.

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NerdyTom. (2021) 'Mexico & Economic Liberalization after NAFTA'. 6 November.

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