The Success or Failure of the Nafta Agreement

The success or failure of the NAFTA agreement

Carlos Israel Hernández Méndez

Walden University

Does the NAFTA benefit all parties?

        Through the text, the authors Cateora, Gilly, & Graham, (2010) provided key provisions of the NAFTA Agreement, Which seemed promising at the time of the sign of the Agreement. Indeed, in theory, it would allow the members of the NAFTA to benefit from liberalisation of markets, and in this case, in particular, Mexico could have benefited enormously with it.

However, as Tornell, Westermann, & Martinez, (2004) stated, Mexico’s economy was underperforming during 1990’s and from 2001 to 2003 GDP growth stagnated, and non-oil products exports decreased an average of 1% a year. Challenging the argument that liberalisation promotes growth. A reason to this was the protectionist policies Mexico had since World War II, the sudden open of the Mexican markets took by surprise local businesses, unable to compete with the quality and innovation of the foreign goods, and eventually led to mass bankrupt of companies.

Another cause of this failure was an economic crisis right after the sign of the NAFTA, which lead to the bankruptcy of 14 out of the 18 banks in Mexico at the time and the privatisation of the four surviving banks, (Granados, 2012). Also, another drawback of the NAFTA is the dependence of Mexico of trade with the USA and Canada which according to Rodriguez, (2011) Mexico’s exports to the US and Canada represents 83% of its total exports. Something undoubtedly considered as too risky by any prudent investor.

Nonetheless, with the recent news of US President Donald J. Trump, willing to terminate the NAFTA will inevitably destroy Mexican economy, if the US withdraws it would leave Canada as a lifesaver for the Mexican economy. Thus leading to the conclusion that the NAFTA was wrong for Mexico since the beginning and Agreement that certainly benefited the US and Canada, but affected Mexico severely.

References

Cateora, P. R., Gilly, M. C., & Graham, J. L. (2010). International Marketing. McGraw-Hill Irwin.

Granados, O. (2012, Novemeber 12). “EL FOBAPROA ERA INDISPENSABLE”. Retrieved from Expansión: http://expansion.mx/expansion/2013/02/14/el-fobaproa-era-indispensable