NAFTA Research Articles

Monetary Policy between Mexico, United States of America, and Canada

This article examines the evolution of the monetary policy of the economies that make up the North American Free Trade Agreement ( NAFTA ), for the period 1980-2015. Based on an empirical analysis, which includes the scrutiny of stylized facts of the monetary variables of Canada, the United States and Mexico, causality tests Granger quality and error correction models ( VEC ), it is concluded that, in parallel to the trade integration process of these countries, the monetary side of NAFTA exhibits divergences and convergences that imply an asymmetric integration of the economy Mexican with the United States and, to a lesser extent, with Canada.

The past, present and future of energy law in Mexico: energy law from 1992 to 2022

This paper analyses how the North American Free Trade Agreement (NAFTA) influenced the opening of the Mexican energy sector, beginning in 1992. It evaluates how the multiplication of legal bodies governing the energy industry calls the attention of scholars to the analysis and systematisation of this novel legal discipline. The survey includes a discussion of the 2013 constitutional energy reform and how international treaties shield this reform, preventing a new constitutional amendment from reversing the opening of the Mexican energy sector. Finally, it emphasises that Mexican energy law is now not separate from international commercial law.

Rebirth of integration: from NAFTA to USMCA

International integration associations and agreements play an important role both in the development and in the stabilization of economic relations in various regions of the world. The article examines the historical formation of the Agreement of the North American Free Trade Area (NAFTA), analyzes the problems of this Agreement, which led to its revision and the creation of a new agreement. The author also analyzes the provisions of the new agreement between the United States, Canada and Mexico (USMCA) and compares it with the old Agreement, and also offers a vision of the prospects for the development of economic relations in the region after the entry into force of the USMCA.

Tempos difíceis: os Estados Unidos e o México na “renegociação” do NAFTA

Abstract After a tense process of renegotiating the terms of the NAFTA (North American Free Trade Agreement), the governments of the United States, Mexico and Canada established a new regional agreement, the USMCA (United States, Mexico and Canada Agreement), whose purpose is to overcome problems that emerged since the NAFTA came into force in 1994. The ratification of this document by the national congresses of the referred countries has generated new tensions and instabilities in their political scenario, especially due to the existing structural asymmetries between them. This work aims to analyse the impact of that imbalance in the NAFTA renegotiation process, considering the behaviour of the United States in relation to its partners, especially Mexico.

“Разрыв преемственности” латиноамериканского вектора внешней политики США при Д. Трампе и кризис панамериканизма (2017–2020 гг.)

In this article the author examines the process of revising the Latin American vector of US foreign policy under the presidency of Donald Trump. In particular, the paper analyzes the economic and political aspects of a new US policy in the Latin American region. The main focus of the research is on the reorganization of US economic relations with the countries of the region and cancellation of various financial aid programs and multilateral agreements, including the North American Free Trade Agreement. The main hypothesis of the paper is that US foreign policy under the 45th president underwent a profound change towards diminishing the role of the Latin American region among other foreign policy priorities of the United States. Vivid confrontation with China and the Russian Federation became the center of the contemporary foreign policy course of Washington, making relations with Latin American countries of secondary importance. This shift created a certain power vacuum in the region and opened additional opportunities for extraregional players. China could arguably become one of such players as it is known to have utilized Washington’s weakening grip on the region to its own economic and political benefit, expanding the “One belt, one road” initiative.

US CUSTOMS DIPLOMACY

The content and features of the concept of «customs diplomacy» are studied on the example of the foreign policy activities of the US Customs Administration, which conducts one of the best customs diplomacy in the world. For example, the US Customs Service plays an important role in ensuring not only national but also transnational economic security. The protection of American customs interests by the relevant services begins far from the actual borders of the United States. Therefore, the study of the experience of US customs diplomacy, of course, is relevant for Ukraine. The definition of «customs diplomacy» is given through a set of specific techniques and methods. The methods, techniques and principles of US customs diplomacy are considered, the main provisions of the CBP Global Engagement Strategy are analyzed. The structural units responsible for the implementation of American customs diplomacy are listed, and their competencies are determined. The officials of the US Customs and Border Protection who are responsible for the implementation of customs diplomacy are named. Particular attention is paid to US international cooperation with partner countries in the customs sector. An example of such cooperation is North American Free Trade Agreement (NAFTA). The practice of implementing international projects and initiatives by US customs attachés in other countries (for example, the Container Security Initiative) is analyzed. International training and support programs of methodological and organizational and technical nature, conducted for foreign partner customs services and agencies, are considered. The important role of harmonizing relations between customs services through the conclusion of international bilateral and multilateral agreements is noted. It is noted that international cooperation in the customs sphere is important for solving global problems of the world. Thus, strengthening the cooperation of the US Customs Administration with partner countries, agencies and trade groups contributes to transnational security, efficient trade, travel, dissemination of information etc.

DONALD TRUMP, TPP, NAFTA AND INTERNATIONAL INVESTMENT LAW: TIME TO PANIC OR TIME FOR HOPE?

When newly elected President Donald Trump took the office he almost immediately, with a stroke of a pen, withdrew the US from Trans Pacific Partnership (TPP) and vowed to do the same with North American Free Trade Agreement (NAFTA). Given the magnitude and the significance of both of these treaties not only for international trade, but also for international investment, the urgency of such decisions seem unprecedented. This article examines potential impact of these developments on international investment law regime in the broader context of globalization issues.

North American Free Trade Agreement

The article deals with the relationship between the United States and Mexico from the perspective of the US national security. The key areas of strategic interest in Mexico on the part of the United States include: limiting illegal immigration, fighting drug-related crime, economic cooperation, both bilateral and in the wider international dimension, for example the North American Free Trade Agreement. According to the United States, all three factors and their successful implementation are necessary and constituent elements of the national interest of the United States in its most important scope, that is, in increasing the security of the state. The analysis focuses on the U.S. economic relations with Mexico at the turn of the 20th and 21st centuries. The basis of economic relations between these countries is the North American Free Trade Agreement. The genesis of the NAFTA agreement and its effects on mutual relations in the context of the U.S. national interest and security was presented. Additionally, the reasons for President Donald Trump’s change from NAFTA to USMCA are described, from the perspective of U.S. strategic interests.

Economic de-integration in North America and foreign direct investment from Japan

We investigate, from the perspective of the auto industry, the impact of US steel and aluminum tariffs and the resumption of auto tariffs under the revised North American Free Trade Agreement, on trade in North America and foreign direct investment (FDI) from Japan. The results of our policy simulation analyses with a recursive dynamic computable general equilibrium model are as follows. Canada and Mexico, being alternative trade partners with the US and other countries, would benefit from US steel and aluminum tariffs. Due to the auto tariffs on intra-North America exports, Canada and Mexico would lose a large part of their windfall benefits from US steel and aluminum tariffs. Japan’s FDI in Canada and Mexico would fall sharply. As the de-integration of North American economies proceeded, Japan would increase its auto production and exports. The negative impact on Japan’s welfare, largely the result of US steel and aluminum tariffs, would be neutralized by the US abolition of tariffs on Japanese auto exports.

5. United States–Mexico–Canada Agreement (USMCA) (formerly the North American Free Trade Agreement (NAFTA))

5. United States–Mexico–Canada Agreement (USMCA) (formerly the North American Free Trade Agreement (NAFTA))

From NAFTA to USMCA: Can a Good Idea that Came Too Late Be Born Again?

This article analyzes from the trade perspective the lower-than-expected growth dividends of the export-led strategy adopted by Mexico in the 1990s. Particular attention is given to employment, labor productivity, and regional outcomes. The North American Free Trade Agreement (nafta) caused Mexican exports to skyrocket in the first years of its implementation. This initial lift was quickly sapped by China’s emergence after its entry into the World Trade Organization (wto) in 2001. Recent years witnessed a renewed dynamism of Mexican presence in the U.S. market. In an international context marked by deglobalization and decoupling, this rebound is expected to continue under the United States-Mexico-Canada Agreement (usmca). Yet, in order to deliver economic growth, Mexico needs to diversify the geographical location of its exporting industries. The analysis of Mexican exports shows also that idiosyncratic weaknesses, such as the low contribution of the business services sector or the deficient trade and transport infrastructure, must be addressed.

Dialing for Change: Organizing Call Center Workers in the 1990s

Abstract This article contrasts two Communications Workers of America (CWA) strategic organizing campaigns at Sprint and Southwestern Bell wireless in the 1990s. In the first case, the NLRA failed to protect Sprint workers after their employer closed the call center to avoid a union election, despite a complaint filed by a Mexican union under labor provisions of the North American Free Trade Agreement. In the second case, the CWA's “bargain to organize” strategy neutralized Southwestern Bell's opposition, and 40,000 wireless workers chose CWA representation under a negotiated neutrality/card-check recognition process. This article demonstrates how neoliberal regulatory changes in the telecommunications sector in combination with weak labor laws fostered the decline in union representation in this vitally important and dynamic sector of the economy.

The Rebranded NAFTA: Will the USMCA Achieve the Goals of the Trump Administration for North American Trade?

The United States-Mexico-Canada Agreement (usmca) was the product of a renegotiation of the former North American Free Trade Agreement (nafta) that was intended by the Trump administration to “put America first.” This article analyzes the most important new provisions in the usmca that that administration believed would inhibit foreign investment in Mexico and reverse the offshoring of U.S. jobs. Some of the new provisions represent improvements over nafta, especially the limitations on investor-state dispute settlement and strengthened protections for labor rights. However, the new requirements for automobile production are likely to backfire by making North American automotive production more expensive and less competitive. On the whole, the formation of the usmca probably enhanced, rather than lessened, the confidence of foreign investors in the Mexican economy. However, the agreement is unlikely to bring about large gains in U.S. manufacturing employment or to boost the long-run growth of the Mexican economy.

Real exchange rate synchronization in the NAFTA region

PurposeThe literature mostly investigates the impact of trade and financial integration on business cycle synchronization. The author differs by focusing on the real effective exchange rate as the target variable in the North American Free Trade Agreement (NAFTA) region. In particular, the author investigates synchronization by analyzing the short- and long-run dynamics of the real effective exchange rates of Canada, Mexico and the US for 2008–2019.Design/methodology/approachThe author first employs stationarity and cointegration tests to specify and estimate the long-run equilibrium relation between the real effective exchange rates of Canada, Mexico and the US. The author then specifies and estimates an error-correction model for each real effective exchange rate in order to investigate whether the adjustment in eliminating disequilibrium is asymmetric.FindingsThe results indicate that the real effective exchange rates of Canada, Mexico and the US are cointegrated with only one long-run equilibrium relation. Canada's real effective exchange rate responds symmetrically to eliminate both negative and positive disequilibrium with a similar speed of adjustment. However, the response of Mexico's real effective exchange rate is asymmetric, as it responds to eliminate only positive disequilibrium. The US real effective exchange rate does not respond to disequilibrium, perhaps because it has a large economy with much stronger competition beyond the NAFTA region than both Canada and Mexico.Originality/valueThis is the first study that investigates real effective exchange rate synchronization in the NAFTA region.

Assessing U.S. Agricultural Export Growth Under North American Free Trade Agreement: A Shift-Share Analysis

NAFTA is the first free-trade pact that has transformed and driven economic integration among the United States, Canada, and Mexico. The three NAFTA countries’ agricultural export performance in four major classified commodities was each analyzed prior to the implementation and active years of NAFTA by applying a dynamic shift share model to data from 1992 through 2018. The overall results show United States was found to be the overall beneficiary NAFTA among the participating countries. The U.S. led in the exports of all the four major classified agricultural commodities followed by Canada, and then, Mexico. The most highly exported commodity among the four by any of the member nations, was consumer-oriented products while agricultural-related, intermediate, and bulk commodities follow in that order.

A growing produce bubble: United States produce tied to Mexico’s unsustainable agricultural water use

Global analyses have revealed virtual drains and gains of water between trading countries, with Mexico ranking as one of the countries with the fastest increase in unsustainable water consumption in agriculture for export markets, since 2000. It is unclear, however, how Mexico has reshaped its crop production and associated reliance on freshwater resources to satisfy growing domestic and international markets, especially the United States (US). While the Mexico-US partnership has been identified as one supported by unsustainable irrigation water, the spatial understanding of its strain on water resources has remained at the national scale and without context of the crops driving the change. In this analysis, we focus on the evolution of Mexican agriculture since 1994, the year the North American Free Trade Agreement was enacted, to identify hotspots of water unsustainability in crop production in the domestic and US supply chain. Using a global process-based crop water model, we find that between 1994 and 2015, rainwater (or ‘green’ water) and irrigation (or ‘blue’) water consumed in the production of crops increased by one fourth nationally, while water in crops exported to the US doubled. Virtual export of blue water embodied in the trade of berries increased five orders of magnitude; a substantial growth in blue water export was also associated with trade to the US of cereals, fruits, nuts, vegetables, pulses, and tubers. Our results show that in Mexico irrigated water plays an increasingly prominent role in export agriculture, and that many healthy crops that dominate US imports from the world are grown in water scarce Mexican municipalities relying on unsustainable irrigation practices. This serves as a warning for the sustainability of future Mexican healthy food supplies, both for the domestic market and for export to the US.

Contagious switching

SummaryWe analyze the propagation of recessions across countries using a model with multiple qualitative state variables in a vector autoregression (VAR). The VAR may include country‐level variables to determine whether policy also propagates across countries. We consider versions of the model with observed discrete states or unobserved discrete states, where the latter is inferred from fluctuations in economic data. We apply the model to Canada, Mexico, and the United States to test if spillover effects were similar before and after the North American Free Trade Agreement (NAFTA). We find that trade liberalization increased business cycle propagation across the three countries.

MEXICAN DEMAND FOR RICE IMPORTS (ORYZA SATIVA L.) DURING NAFTA: EVIDENCE FROM A NARDL MODEL WITH STRUCTURAL CHANGE AND OUTLIERS

ABSTRACT 
 Objective:
 This study aimed to determine which model best captures the behaviour of rice imports during the North America Free Trade Agreement (NAFTA) regime (1994–2018).
 Methodology 
 Mexican demand for rice imports is estimated with Autoregressive Distributed Lag Model (ARDL) and Nonlinear Autoregressive Distributed Lag Model (NARDL), both with and without structural change and outliers.
 Results
 It starts with the ARDL and NARDL models, obtaining non-cointegration, as well as diagnosis and specification problems. Subsequently an ARDL model is proposed with structural change and outliers, which represents an improvement but still has specification problems. Finally, the best model is obtained incorporating non-linearity.
 Limitations/Implications 
 It is a study for a specific grain, so the results obtained are only valid for rice imports. Nevertheless, it must be considered that it is a basic grain. Moreover, a new methodology is used to estimate the import demand function.
 Findings 
 There is evidence of an asymmetric response of rice imports to fluctuations in economic activity and the exchange rate in the short run, and only in the long run for the latter. An increase in rice imports with NAFTA is also confirmed, as well as two extraordinary variations of rice imports during the study period.
 Keywords
 Rice imports; ARDL; NARDL; structural change; outliers 

Salarios e inflación en la manufactura mexicana. Un comparativo de dos periodos: 1994-2003 y 2007-2016

The effect of wages on price inflation has been a foremost subject in economics. This paper evaluates the effect in Mexican manufacturing for two sets of periods. The first one, from 1994 to 2003, covers an initial period of the North American Free Trade Agreement (NAFTA). The second period encompass from 2007 to 2016, comprising the Great Recession. For both periods, data is available on a monthly frequency. A first equation deals with wages and bilateral nominal exchange rate impacts on the producer price inflation. A second equation measures the effect of this last variable, besides a bilateral nominal exchange rate and the wage effect on consumer price inflation. These equations follow Pujol and Griffiths (1997), using an error correction model and Granger causality tests. The results for the mentioned periods expose those wages have an almost null effect in both the inflation of producer and consumer prices.

ENERGY INTENSIVE MANUFACTURING INDUSTRIES AND GHG EMISSIONS.

This paper analyzes changes in U.S. energy-intensive, trade-exposed (EITE) manufacturing over the past decade, through the lens of previously proposed climate policy measures. The American Clean Energy and Security Act of 2009 defined measures and thresholds for EITE eligibility and proposed compensatory allowances designed to reduce negative competitive impacts to domestic industry and to prevent emissions leakage. We undertook a retrospective analysis of the 2009 eligibility criteria, using the same methods with more recent data to examine trends over the 2004-2017 period. We find that energy intensity, emissions intensity, output, and emissions have fluctuated with economic conditions, and defining measures and thresholds that remain informative is challenging. Had ACES been enacted as written and not revised, the number of sectors qualifying for rebates would have decreased from 39 to 26, after adjustment for the changes in North American Industry Classification System definitions. Emissions from the eligible sectors fell 26% across the three periods of analysis, while emissions from manufacturing as a whole fell 5%. We decompose the changes in emissions into scale and intensity measures based on a hybrid measure derived from Grossman and Krueger [(1993). Environmental impacts of a North American free trade agreement. In The US-Mexico Free Trade Agreement, PM Garber (ed.). Cambridge, MA: MIT Press] and Kaya and Yokoburi [(1997). Environment, Energy, and Economy: Strategies for Sustainability. Tokyo: United Nations University Press]. As an alternative, we perform the same analyses using the EPA's Greenhouse Gas Reporting Program data. These data, not available when ACES was written, offer annual greenhouse gas estimates for facilities that emit more than 25,000 tons CO2e annually. Finally, we draw some recommendations for future policy including (1) using measures that make price level adjustments straightforward or unnecessary, (2) keeping EITE policy focused on a small group of industries to minimize sectoral reclassification problems, (3) identifying industries prone to emissions leakage rather than just changes in output and (4) consider spatial heterogeneity of emissions and trade patterns.