NAFTA Research Articles

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

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.

Development trends of trade and economic relations between Ukraine and NAFTA countries

Methods. The theoretical and methodological basis of the research is the work of domestic and foreign scientists. The results were obtained with the application of a system of methods. In particular, the methods of grouping, classification and quantitative comparisons were used in the study of the current economic condition of the NAFTA countries, the methods of structural and economic-statistical analysis were used to assess the main financial indicators of trade and economic relations between Ukraine and NAFTA countries, the graphic method was used for a visual representation of the obtained research results. Results. The article is devoted to the analysis of the main trends in the development of trade and economic relations between Ukraine and NAFTA countries. An analytical review of the current economic state of the USA, Canada and Mexico was carried out. The main drawbacks of the North American Free Trade Agreement have been revealed. The provisions of the new US-Canada-Mexico Agreement (USMCA), which was created to replace NAFTA, are characterized. The issue of economic cooperation between Ukraine and NAFTA countries was revealed. A detailed comparative analysis of the main statistical indicators regarding the development trends of Ukraine’s economic cooperation with NAFTA countries in the field of trade in goods and services was carried out. Novelty. The prospects for further development of Ukraine’s trade and economic relations with the NAFTA countries were determined. Practical value. The analysis of the dynamics of export-import operations between Ukraine and NAFTA countries makes it possible to predict the development trends of their economic relations in the future.

An interview with Oscar Ocampo: On reaching net zero in Mexico

Mr. Oscar Ocampo is an energy coordinator at the Mexican Institute for Competiveness (IMCO), a non-profit, non-partisan research center that researches and acts on evidence to solve the most important challenges in Mexico. Prior to IMCO, he worked as an advisor to the independent directors of the Board of Directors of the Federal Electricity Commission (CFE). He was also a consultant in public affairs at De la Calle, Madrazo, Mancera, SC, where he participated in the design and evaluation of public policies, regulation, legislative reforms, sectoral studies, matters related to international trade and the North American Free Trade Agreement, as well as in the review of international best practices for various industrial and service sectors. He studied Political Science at the Universität Hamburg and has a Master’s degree in Public Policy from the London School of Economics and Political Science.

The institutional design of CUSMA: Improvement or reversal vis-à-vis NAFTA?

In this article we comparatively analyze the institutional design of the 2020 Canada-United States-Mexico Agreement (CUSMA) vis-à-vis the 1994 North American Free Trade Agreement (NAFTA). In the modernization of NAFTA into CUSMA, three strategies were employed: updating, upgrading, and adjusting the institutional design. We explore whether the implementation of these strategies provide a better governance of free trade and investment in the region compared to NAFTA. To do so, we conduct an in-depth evaluation of both agreements. Our central argument is that there were both progress and reversals in several areas: for example, the strength and powers of dispute settlement mechanisms, an improvement in the implementation of the working groups, changes in the flexibility or rigidity of its architecture depending on the sector analyzed, among many others. The article is comprised of three sections, each of them dealing with one of the three strategies under scrutiny. Finally, based on the central findings, we provide some public policy recommendations to strengthen the governance of free trade and investment in North America through the CUSMA.

On the evolution of manufacturing production concentration in Mexican states and its relationship to their level of economic complexity

We identify a link between the evolution of the concentration of manufacturing production among Mexican states and their level of economic complexity. Our results suggest that the concentration of manufacturing production among the country’s states evolved according to the predictions of standard models of international trade. However, the North American Free Trade Agreement (NAFTA) had a particular effect on each individual state, depending on its economic structure. More complex states, i.e., those more productively diverse and specialized in more sophisticated manufacturing goods, experienced a higher increase in their level of production concentration after NAFTA and were less affected by competition from Chinese exports to the U.S. In contrast, NAFTA had a less significant impact on the production concentration of less complex states, while competition from China halted their move towards greater specialization and even reversed it somewhat. These findings highlight the important role of international trade in shaping the development of the economic structure of Mexican states in the period under analysis

Spatial and Temporal Changes in Crop Species Production Diversity in Mexico (1980–2020)

Crop species diversity is a key component of agroecosystem resilience, food system stability, ecosystem services production, and sustainable development. Despite its importance, quantitative understanding of crop species diversity is often lacking. This study assesses changes in crop species production diversity in Mexico from 1980 to 2020 at state, regional, and national levels. Measures of crop species richness and effective diversity (alpha, beta, gamma) were derived from government production data on 304 species, each stratified into rainfed and irrigated components. Time series of these components reveal three main findings: (1) diversity generally increased during the study period, especially among fruits, vegetables, spices and herbs, and ornamental crops; (2) the diversity of irrigated crops was about two times higher than the diversity of rainfed crops, despite comprising a small fraction of the total cultivated area; and (3) the diversity of irrigated crops increased dramatically after implementation of the North American Free Trade Agreement (NAFTA) in 1994—though most increases occurred in dry northern regions where production depended on unsustainable irrigation. In sum, findings show that while crop diversity can contribute to numerous forms of sustainability, not all diversification processes derive from agroecologically-based, sustainable forms of intensification. In Mexico, crop species diversification was associated with a post-1994 boom in produce exports to the United States and the unsustainable use of scarce water resources at home. Such context-specific understanding is crucial for determining whether crop diversification, in all its forms, ultimately leads to sustainable outcomes.

Racializing Trade in Corn: México Fights Maíz Imports and GMOs

ABSTRACT International economic law (IEL) is racialized in México. This is evident with the North American Free Trade Agreement, US Mexico Canada Agreement (USMCA), and ongoing litigation changing how Mexicans grow, buy, and consume corn. Racialization develops from law privileging foreign access, at the cost of domestic abilities to counter economic entry. This has domestic and international consequences. Mestizo, campesino, and Indigenous sectors disproportionately bear the domestic effects of corn imports and GMO (genetically modified organism) corn. Imports and GMOs displace rural labor. Meanwhile, GMOs irreparably harm biodiversity. The USMCA protects ‘trade in’ GMOs while simultaneously discounting sovereign determinations by Mexican regulators. This echoes international law’s history of racist reasoning to exclude Global South states. This article proposes racial capitalism methods to pinpoint how and where IEL racializes cross-border trade. They show how neoliberal laws resulted in price spikes, labor migration, and unhealthy diets. Current GMO controversies open the door to two IEL paths: resistance or market access. As resistance, Mexican court rulings based on Precautionary Principle norms prohibit GMO corn seeds. With market access, the USMCA harmonizes biotechnology regulations, effectively trumping determinations by Mexican authorities. In sum, as neoliberal and current developments show, IEL racializes trade with disproportionate consequences felt domestically and by displacing Mexican sovereignty internationally.

Sanctions or No Sanctions: Enforcing Labour Provisions in Free Trade Agreements

The inclusion of labour provisions in trade agreements which commenced with the North American Free Trade Agreement (NAFTA) in the 1990s and other developed countries such as Canada and the EU saw the reaffirmation and implementation of commitments undertaken as part of the International Labour Organization (ILO) Conventions that these countries have ratified – with specific emphasis on respecting, promoting and realizing the core labour standards. While the general commitments and the nature of labour standards included in different agreements are largely similar, the approaches to enforce these standards under various agreements have differed widely. While the major developed economies (US, Canada and the EU) all include substantive labour provisions in their trade agreements as a standard practice now, their approaches to enforcement of these provisions are strikingly different (with US-Canada approach largely similar). These two contrasting approaches are – (1) that entails a possibility of monetary assessment, countermeasures or suspension of preferential benefits (sanctions based) and (2) that is based exclusively on recommendations and directions by a Panel of Experts as part of the dispute resolution process without any possibility of economic assessment (non-sanctions-based). This article provides an overview of these two main approaches towards enforcement of labour provisions in trade agreements. In light of the recent emphasis placed on including stronger enforcement mechanisms within the Free Trade Agreements (FTAs’) on sustainability, specifically in the EU this article examines the two approaches and highlights the approach which would be better suited for enforcing labour standards. Labour Standards, occupational safety and health, TSD, Dispute Settlement, Enforcement, NAFTA, NAALC, USMCA, Labour Provisions in FTAs’, Rapid Response Labour Mechanism, ILO Conventions, EU-Korea Labour Dispute, countermeasures, monetary assessment, suspension of benefits.

Binational Panel Review of Trade Remedies Determinations: Prospects for Exporting the USMCA’s Unique Procedure

The United States-Mexico-Canada Agreement (USMCA) contains a distinctive procedure under which anti-dumping and countervailing duty determinations by national agencies can be reviewed by an ad hoc binational panel established under the treaty as an alternative to domestic court review. Binational panel review was first adopted in the Canada-US Free Trade Agreement (Canada-US FTA) to respond to Canada’s concern that the administration of the US anti-dumping and countervailing duty laws by the US agencies was biased in favour of the US domestic industries and the review of agency determinations by the US courts was inadequate to address that bias. Continuing Canadian concerns, shared by Mexico, resulted in binational panel review being included in the USMCA, even though the US had sought to eliminate it. Compared to US judicial review, binational panels under the Canada-US FTA and its successor, the North American Free Trade Agreement (NAFTA), have resulted in more frequent remands of the US agency determinations often leading to lower (or even zero) duties in anti-dumping and countervailing duty cases. As well, the prospect of rigorous panel review has discouraged the filing of anti-dumping and countervailing duty cases, the commencement of anti-dumping and countervailing duty investigations, and the imposition of duties in relation to imports from Canada and Mexico. Adopting binational panel review in other treaty contexts would be most attractive where significant concerns about domestic agencies comparable to Canada’s are present and national anti-dumping and countervailing duty regimes in participating countries have similar structures and procedures for judicial review. anti-dumping, countervailing duty, trade remedies, free trade, North America, dispute settlement

The 2022 ICSID Rules: A Leap Toward Greater Transparency in ICSID Arbitration

The International Centre for Settlement of Investment Disputes (ICSID) recently issued an amended set of rules to govern its arbitration proceedings.2 One of the core topics addressed by the new Rules is transparency and the mechanisms by which ICSID arbitrations—traditionally confidential—may be ‘opened’ to the public. On this issue, the 2013 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration played an influential role in shaping the new ICSID Rules.3 But ICSID took a slightly different approach by giving States more authority to decide which parts of the proceedings will be kept confidential. This note addresses ICSID’s new transparency regime and how it differs from UNCITRAL’s regime. The transparency movement began with the North American Free Trade Agreement (NAFTA) in 2001. The three NAFTA States—Canada, Mexico and the United States—agreed that ‘nothing in the NAFTA precludes [them] from providing public access to documents submitted to, or issued by, a [NAFTA] tribunal’.4 Two years later, they allowed non-disputing parties to comment on the proceedings.5 One year later, they opened NAFTA hearings to the public.6

“Only the intervenor cared”: Tracing the neoliberalization of environmental policy in Wisconsin's Dairyland

Drawing from Peck and Tickell’s (2002) theory of roll-back and roll-out neoliberalism and Brenner et al.'s (2010) theory of variegated neoliberalism, this paper uses comparative historical analysis to understand how the state of Wisconsin suppressed its legacy of progressive environmentalism and embraced neoliberal policy over time. Specifically, this paper examines the rapid expansion of concentrated animal feeding operations (CAFOs) in Wisconsin’s dairy industry since 1995. As these large CAFOs have grown in size, so have the social and environmental problems related to their use, including pollution of drinking water sources for rural communities. Based on analysis of newspaper articles between 1965-2010, I observed that that a turning point towards neoliberalism occurred with the demise of the Office of the Public Intervenor (OPI), a legally designated adversarial force unique to the state that was created in 1967 after a powerful coalition of environmental social movements defeated an attempt to merge the offices of development and environmental protection. Despite the continuous efforts of industry, the effort to weaken environmental regulations and institutions in Wisconsin failed not only in 1967, but in 1984 as well. However, by 1995, immediately after the passage of the North American Free Trade Agreement, the state switched their support from populist environmental social movements to industry. Through deregulation, elimination of the OPI, and the gradual dissolution of environmental social movements, the state of Wisconsin created the conditions that enabled CAFOs to expand without the “burden” of environmental regulation. Subsequently, through re-regulation, Wisconsinites lost access to legal remedies that could curb polluting practices of large CAFOs. This research is part of a larger project to understand the environmental impacts of regulatory failure in the Core as states in the Global North continue to adopt neoliberal environmental policy.

Some benefit, some are left behind: NAFTA and educational attainment in the United States

This paper examines the persistent effects of eliminating tariffs on Mexican imports, following the implementation of the North American Free Trade Agreement (NAFTA), on Americans' human capital investment. We leverage quasi-experimental changes in tariffs on Mexican imports across birth cohorts and within states. We show that NAFTA increases the probability of ever attending college and earning a degree. These results, however, mask important heterogeneous effects within the sample. We find white Americans drive these positive effects. In contrast, the educational attainment of racial and ethnic minorities, especially men, shrank under NAFTA, decreasing their probability of graduating from high school.

Examining Labour Rights Enforcement Mechanisms in NAFTA and the USMCA and its Impact on Labour Conditions in Mexico

The purpose of this paper is to examine changes made to labour rights enforcement mechanisms under the United States-Mexico Canada Agreement, from its predecessor agreement, the North America Free Trade Agreement, and the impact it may have on labour conditions in Mexico. Some scholars argue that the labour rights enforcement mechanisms in the North America Free Trade were fundamentally flawed, and allowed the Mexican government to passively enforce its domestic labour laws to the detriment of its workforce. This paper will argue that while the United States-Mexico Canada Agreement has made positive advancements to remedy labour issues under the North American Free Trade Agreement, limitations still exist, which may promote inequities amongst Mexican workers.

The Impact of the Regional Trade Agreements on Inflow of Mexican Foreign Direct Investment: An Empirical Approach

This article aims to empirically evaluate, based on the annual time series from 1970 to 2018, the hypothesis that regional trade agreements (RTA) had a positive impact on the Mexican Foreign Direct Investment (FDI) inflow in this period. We use the North American Free Trade Agreement (NAFTA) to evaluate its impact in Mexico, which entered into force in 1994. In this context, our interest variable is the dummy d_1994, where from 1994 to 2018 it is equal to 1. We tested several empirical approaches based on ARDL models, robust least-squares methods as well as GMM methods. We also use Granger causality tests and impulse response tests based on the VAR system. All empirical models show that the estimated coefficient from the dummy variable, d_1994, is statistically significant and presents a positive sign. Moreover, the causality tests show that the variable d_1994 granger causes FDI as a proportion of GDP, and the impulse response tests validate the tested hypothesis as well.

The Trade Reform Wave of 1985–1995

The decade from 1985 to 1995 will go down in history as an unprecedented period in which global trade barriers were reduced. Some trade agreements (the North American Free Trade Agreement, the European Single Market, the Uruguay Round) were prominent late in this period, but the reform wave was led by developing countries in Latin America and Asia and formerly communist countries in Eastern Europe undertaking unilateral reforms. What accounts for this remarkable shift in policy? This paper highlights the declining use of trade restrictions for balance of payments purposes and the rise in exchange rate flexibility as important factors driving the policy change.

Determinants of Latin American and the Caribbean agricultural trade: A gravity model approach

Latin America and the Caribbean (LAC) region is one of the most important players in global agricultural trade. They have vast potential to strengthen their position as a result of the region's opportunities to increase agricultural production when combined with growing global demand, which could help the region's economy thrive. To discover the LAC potential agricultural trade pattern, this paper aims to analyse the determinants of LAC agricultural bilateral export for the period 1995–2019. The gravity model of trade was employed by estimating various Poisson pseudo-maximum likelihood (PPML) models including zero trade flows for panel data. The findings show that importers' GDP of LAC countries has a greater impact on agricultural trade compared to LAC exporters. Cultural similarities (common language) and countries' participation in Southern Common Market [Mercado Común del Sur (MERCOSUR)] stimulated agri-food export. Conversely, distance (transportation), past colonial links, and North American Free Trade Agreement (NAFTA) raised trade costs, having a negative impact on the export of agricultural products. The impacts of environmental regulations are ambiguous. This paper contributes to the literature by investigating the factors of agri-food export in LAC countries, which can be an important instrument for decision-makers adjusting agricultural trade policy.

Globalized supply chains: Emergent telecouplings in Mexico’s beef economy and environmental leakages

This article analyzes how trade liberalization in Mexico, particularly following the North American Free Trade Agreement (NAFTA), has transformed that nation’s cattle economy into a feedlot system manifesting multiple telecouplings and based on the transnational provision of inputs. A conceptual model is presented that suggests how environmental effects involving land use and GHG emissions emerge from changes in the beef supply chain. The article then presents an empirical analysis establishing that the production of corn and beef has intensified in the wake of NAFTA, and that deforestation rates have declined over the same period. Evidence is also presented showing that this has not precipitated a land sparing effect, given the leakage of deforestation into Central America, which supplies Mexican feedlots with 36 % of their source materials. The article calculates associated GHG emissions and establishes that enteric fermentation dominates deforestation as a source, and that ∼14% of GHGs produced by the post-NAFTA Mexican supply chain are emitted in Central America. This raises accounting questions for signatories to the Paris Climate Treaty, given commitments are nation-based.

Spatial patterns and determinants of avocado frontier dynamics in Mexico.

The surging demand for commodity crops has led to rapid and severe agricultural frontier expansion globally and has put producing regions increasingly under pressure. However, knowledge about spatial patterns of agricultural frontier dynamics, their leading spatial determinants, and socio-ecological trade-offs is often lacking, hindering contextualized decision making towards more sustainable food systems. Here, we used inventory data to map frontier dynamics of avocado production, a cash crop of increasing importance in global diets, for Michoacán, Mexico, before and after the implementation of the North American Free Trade Agreement (NAFTA). We compiled a set of environmental, accessibility and social variables and identified the leading determinants of avocado frontier expansion and their interactions using extreme gradient boosting. We predicted potential expansion patterns and assessed their impacts on areas important for biodiversity conservation. Avocado frontiers expanded more than tenfold from 12,909 ha (1974) to 152,493 ha (2011), particularly after NAFTA. Annual precipitation, distance to settlements, and land tenure were key factors explaining avocado expansion. Under favorable climatic and accessibility conditions, most avocado expansion occurred on private lands. Contrary, under suboptimal conditions, most avocado expansion occurred on communal lands. Large areas suitable for further avocado expansion overlapped with priority sites for restoration, highlighting an imminent conflict between conservation and economic revenues. This is the first analysis of avocado frontier dynamics and their spatial determinants across a major production region and our results provide entry points to implement government-based strategies to support small-scale farmers, mostly those on communal lands, while trying to minimize the socio-environmental impacts of avocado production.Supplementary InformationThe online version contains supplementary material available at 10.1007/s10113-022-01883-6.

Review: The End of the Myth: From the Frontier to the Border Wall in the Mind of America, by Greg Grandin

Review: <i>The End of the Myth: From the Frontier to the Border Wall in the Mind of America</i>, by Greg Grandin

NAFTA in Mexico: What Worked? And What Did Not?

Mexico joined the General Agreement on Tariffs and Trade in 1986 and less than a decade later joined the North American Free Trade Agreement (NAFTA) with the United States and Canada in 1994. Before these trade liberalizing moves, Mexico had hit a few bumps in the road when it came to stimulating economic growth. Unfortunately, the post NAFTA world and especially the COVID-19 world have only left more bruises on Mexico’s economy. Most economists will agree that the Mexican economy is currently in struggling shape and that some positive effects of NAFTA did not help. The purpose of this paper is to point out the small handful of economic aspects from NAFTA that had a positive effect on Mexican Trade and the Mexican economy. After explaining each aspect of what worked and why it did not last, we will conclude with what we can learn from this and what can be changed looking forward.