Mexico’s trade affairs
NAFTA, FTAA, Doha Round

by: Gerda Frentz

1. Mexico as a NAFTA member  3

1.1 NAFTA’s influence on Mexico’s agriculture 4
1.2 NAFTA’s influence on Mexico’s industry 7
1.3 Conclusion  9

2. Mexico’s position on 11

3. Mexico’s position on 13

4. Conclusion: Multilateralism vs. Bilateralism 15

1. Mexico as a NAFTA member

The North American Free Trade Agreement is an agreement between Mexico, Canada and the USA, which is based on the principles of the European Union. It was established in January 1, 1994 and has the purpose to lower trading barriers as much as possible to reach a more fluent international trade, which means more gains from trade for each of the countries.

Even though the three countries are neighbors it is remarkable that two first world countries and the third e.g. second world country, Mexico, are responsive to such a close agreement. One wonders how the interaction between those countries works.

Indicators for poverty in Mexico are for example that in 2002 half of the population in Mexico was living in poverty and one fifth in extreme poverty.¹ As we can see by taking a closer look to their GDP as an indicator for their financial and economic situations we recognize large differences between the two richer countries and Mexico, which of course does not belong to the poorest of the poor but still does not take in one of the first places in the world rank.

[table only in downloadfile] ²

Questions that might appear in this perspective are, if Mexico can face trade with those higher developed countries as an equal partner and in how far Mexico’s economic situation improves through it. Which industries benefited most and which industries might have suffered by higher productivity in other countries show as a result if the initial intuition of NAFTA could be realized. In the following we want to examine in how far the NAFTA improved Mexico’s economic situation especially in the sectors of agriculture and other industries. We will discuss the equality of the countries and if given dominant positions.

1.1 NAFTA’s influence on Mexico’s agriculture

The more developed the country the less important is agriculture for the economy. In high developed countries as in the example of the USA agriculture contributes in average 2% to the GDP. In Mexico’s case agriculture makes up 8% of the Gross Domestic Product (GDP) and employs 22 %of the labor force, which makes this sector very influential.

Exports from the USA to Mexico amount to 12 % of all US American agricultural exports whereas Mexico exports to the US $4.7 billion. This makes up 60% of all agricultural exports for Mexico. ³

Only 12% of Mexico’s land is arable while the US has 19 percent of arable area. Those numbers show us how much each country is depending in the agricultural sector. Agriculture still plays an important role for Mexico’s economy and due to the large working force a large part of the population lives on it. Shortly after NAFTA entered into force the employment in agriculture in Mexico started to reduce constantly. In 1993 there were 8.1 million Mexicans employed in the agricultural sector; in 2004 6.8 million were working in this area. The percentage of population that was engaged in the agricultural sector withered from 1991 between 2004 at about 10 %.

Since NAFTA’s approval in 1993, Mexico became the U.S. second largest market overtaking Japan. In 1993 Mexico still imported $3.6 billion worth of U.S. agricultural products whereas in 2004 $8.5 billion were imported.⁴

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1 http://web.worldbank.org

2 http://www.worldfactsandfigures.com/gdp_country_desc.php

3 http://www.usmcoc.org/n8.html

4 http://www.fas.usda.gov/