Foreign Trade Policy and Growth: A Comparison of Mexico and Costa Rica

Exposé Écrit pour un Séminaire / Cours , 2005 , 33 Pages , Note: A-

Economie politique - Théorie et Polititque du commerce extérieur

There has been a lot of work on the relation between openness and economic growth, with results being ambiguous. A study done by Sachs and Warner (1995), using a sample of 135 countries, has shown that there is a positive correlation between openness and growth, e.g. that trade liberalisation fosters economic performance. The assumptions and country categorisations of this study have been criticised by Rodriguez and Rodrik (2000); they concluded that low tariff rates do not necessarily imply higher growth rates but that tariff protection exceeding a certain level stifles growth. Dollar and Kray (cited in Santos-Paulino and Thirlwall, 2004) compared different sets of countries with each other and found out that changes in growth rates are positively correlated with the share of trade and thus greater openness has accelerated economic growth. This essay compares the foreign trade policy of Mexico and Costa Rica. Even though both countries pursued the same policies, some differences can be found. Both implemented a strategy of import-substituting industrialisation until the serious crisis at the beginning of the 1980s, followed by a period of extensive trade liberalisation. This was due to pressure put on by the international institutions such as IMF or World Bank. While Mexico opened up its market, Costa Rica went further and lowered the import barriers. They put a strong emphasis on attracting foreign direct investment. With an average annual growth rate of 4.78 percent in Costa Rica and 4.43 percent in Mexico over the last four decades both countries achieved a strong economic growth exceeding the average of all other Latin American countries. However a positive interrelation between openness and growth could not be found in this study. This essay is structured in four main parts. Section II of this paper deals with the fundamental comparability of Mexico and Costa Rica. Section III portrays the foreign trade policies of both countries and illustrates the main similarities and differences. The development of growth is outlined in Section IV. Section V concludes the paper.

Inhaltsverzeichnis (Table of Contents)

• I. INTRODUCTION
• II. THE COMPARABILITY OF MEXICO AND COSTA RICA
• III. ILLUSTRAtion of the Foreign TrADE POLICIES in Mexico aND COSTA RICA
  • 1. Mexico
    • 1.1. The four decades of import-substituting industrialisation
    • 1.2. The era of extensive trade liberalisation
    • 1.3. NAFTA and the post-liberalisation era
  • 2. Costa Rica
    • 2.1. Implementation of a strategy of import-substitution
    • 2.2. Import liberalisation and the export-led-growth strategy
    • 2.3. Trade policy since the accession to GATT
  • 3. Similarities and differences
• IV. GROWTH
  • 1. Mexico
  • 2. Costa Rica
  • 3. Comparison
• V. CONCLUSION

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This essay aims to compare the foreign trade policies of Mexico and Costa Rica, analyzing their impact on economic growth. Both countries implemented similar strategies, including import-substituting industrialisation and trade liberalization, but with notable differences in their approaches. The essay explores the historical context and key factors influencing their respective trade policies and evaluates the correlation between openness and growth. The key themes explored in the essay include:

• The impact of trade policies on economic growth
• The role of import-substituting industrialisation and trade liberalization in development
• The influence of international institutions on national trade policies
• The significance of foreign direct investment in economic growth
• A comparative analysis of Mexico and Costa Rica's trade policies and their outcomes.

Zusammenfassung der Kapitel (Chapter Summaries)

• I. Introduction: This section introduces the topic of trade policy and its relationship to economic growth, citing previous research findings and highlighting the ambiguity surrounding the correlation. The essay then outlines the specific focus on Mexico and Costa Rica, emphasizing their similar trade policy trajectories despite some notable differences. The introduction also mentions the countries' impressive economic growth rates, raising the question of whether a positive correlation between openness and growth can be established.
• II. The Comparability of Mexico and Costa Rica: This section examines the fundamental similarities and differences between Mexico and Costa Rica, setting the stage for a comparative analysis of their trade policies. It considers factors such as size, resource endowment, and institutional structures, providing a context for understanding the countries' unique development paths.
• III. Illustraion of the Foreign TrADE POLICIES in Mexico aND Costa Rica: This section provides a detailed account of the trade policies implemented by both Mexico and Costa Rica over several decades. It traces the evolution of their strategies from import-substituting industrialisation to trade liberalization, including key milestones and the driving forces behind these policy shifts. The section also analyzes the specific measures taken by each country, highlighting their distinctive approaches and the impact of international pressure and institutions.
• IV. GROWTH: This section examines the growth performance of both Mexico and Costa Rica, analyzing their respective economic trajectories in relation to their trade policies. The section compares their growth rates over different periods, exploring potential correlations between openness and growth. The analysis likely considers factors beyond trade policies, such as domestic economic conditions and global trends, to provide a comprehensive picture of the determinants of growth.

Schlüsselwörter (Keywords)

This essay focuses on the relationship between foreign trade policy and economic growth, examining the experiences of Mexico and Costa Rica. The study explores themes such as import-substituting industrialisation, trade liberalization, foreign direct investment, international institutions (IMF, World Bank), and the impact of trade openness on growth. Key concepts include trade policy instruments, economic growth rates, and the development trajectories of the two countries. The analysis also considers the role of structural adjustment programs and their influence on trade policies.

• Université: University of Auckland (Business School - Faculty of Economics)
• Cours: Trade & Development
• Note: A-
• Auteur: Fabian Barthel (Auteur)
• Année de publication: 2005
• Pages: 33
• N° de catalogue: V46533
• ISBN (ebook): 9783638437042
• ISBN (Livre): 9783638658850
• Langue: anglais
• mots-clé: Foreign, Trade, Policy, Growth, Comparison, Mexico, Costa, Rica, Trade, Development