The political economy of a North–South trade agreement and the development prospects for Mexico: from NAFTA to USMCA

Abstract

ABSTRACT In the 1980s, Mexico switched from a policy of import substitution to export-oriented development. From 1994, it participated in a North–South free trade agreement with the United States and Canada (North American Free Trade Agreement – NAFTA). The agreement strongly reflected the asymmetric power of the three participants, although some Mexico’s regions served as production platforms in global value chains. Under NAFTA, Mexico’s overall growth was insipid, yet a trade surplus with the United States was the excuse for Donald Trump’s government to impose a renegotiation that led in 2020 to a new agreement (US, Mexico, Canada Agreement – USMCA) with terms yet more favourable to the United States. In the light of this experience and the political and economic factors that explain it, this paper studies to the need to get Mexico’s trade policies right through permanent consideration to the development needs in the country.