gerber ppt13

8/9/2019 Gerber Ppt13

1/21

Chapter 13

Economic

Integration

into North America


2/21

Copyright © 2005 Pearson Addison-Wesley. All 13-2

Chapter Objectives

• Explore the formation and impact of theCanadian-United States Trade

Agreement CUSTA! and theNorth American "ree Trade

Agreement NA"TA!

•

Understand the so#rces of politicalcontrovers$ s#rro#nding NA"TA%snegotiations and ratification


3/21


Introd#ction& Characteristics

of the North American 'ar(et


4/21


The North American 'ar(et in S#m

• Enormo#s mar(et& larger than the EU

• )ast income differences bet*een 'exico on the one

hand+ and the U,S, and Canada+ on the other– o*ever+ p#rchasing po*er parit$ gap is smaller

– On average+ the North American mar(et is ver$ rich

• The North American mar(et is mar(ed b$ n#mero#s

diffic#lt polic$ .#estions on migration andenvironmental and labor standards+ for example


5/21


Trade "lo*s in North America


6/21


FIGURE 13.1 U,S, 'erchandise

Trade *ith Canada


7/21


The Canadian/U,S, Trade

Agreement CUSTA! of 0121

• elped Canada overcome gro*ing U,S,

protectionism and Asian competitiveness–

o*ever+ man$ Canadians feared competition b$U,S, firms+ erosion of Canada%s social programs+and U,S, c#lt#ral infl#ence

• 3ather modest impact

– In 0121/0114+ U,S, exports to Canada gre* b$45,56+ and Canadian exports to the U,S, b$ 776

– Canadian fears *ere largel$ #nfo#nded


8/21

Copyright © 2005 Pearson Addison-Wesley. All 13-

'exico%s Economic istor$

• 8et*een the end of 9orld 9ar II and 012:s+ 'exico

follo*ed in*ard-oriented import substitution

industrialization (ISI) policies;ind#strial policies

targeting the development of man#fact#ring sectors

that can compete against imported goods

– ISI s#cceeded in stim#lating gro*th and a shift

to*ard ind#striali?ation

– o*ever+ ISI created serio#s problems& red#ced export

capacit$ and created conditions for corr#ption


9/21

Copyright © 2005 Pearson Addison-Wesley. All 13-!

'exico%s Economic T#rnaro#nd

• In the late-01@:s+ 'exico *as prospering than(sto high reven#es from oil prod#ction

•o*ever+ problems emerged in 0120– 9orld oil prices declined+ red#cing 'exicos

credit *orthiness

– =ramatic rise in U,S, interest rates increased theinterest charged on 'exico%s debt *ithcommercial ban(s

• In A#g#st 012B+ the debt crisis began& 'exicos#spend pa$ments of the principal of its debts


10/21


The 012:s& The ost =ecade

• 012:s *as the lost decade in atin America& gro*th *as nonexistent+

foreign capital stopped flo*ing in+ creditbecame scarce+ investment declined

• The economic crisis stemmed from

macroeconomic mismanagement& largegovernment expendit#res hadincreased borro*ing and indebtedness


11/21


3esolving the =ebt Crisis

• 'exico agreed on b#dget c#ts and

peso deval#ation in ret#rn to

restr#ct#ring the debt repa$ments *ithU,S, government+ ban(s+ and the I'"

• 8#dget c#ts and inflation had a social

cost& real *ages fell b$ 4:/7:6 in

012D/0122


12/21


3esolving Economic >roblems

• In 012B+ 'exico also set o#t to attac( the deep-

seated str#ct#ral problems of the econom$

– Inflation *as c#rbed

– Import restrictions and trade barriers *ere red#ced& average

tariffs declined from B@6 to 0D,06 bet*een 012B and 011B

– The role of the state in the econom$ *as red#ced& state-

o*ned companies *ere privati?ed

• Str#ct#ral reforms revived gro*th and attractedforeign investment


13/21


The North American "ree Trade

Agreement NA"TA! of 0114

• Tariffs on abo#t half of goods traded bet*eenU,S, and 'exico *ere eliminated immediatel$– 'ost dramatic changes in 'exico& average tariffs on

U,S, goods fell from 0:6 to B,16 bet*een 011D and0115+ *hile U,S, tariffs on 'exican goods fell fromB,:@6 to :,576

• NA"TA specified content re.#irements for goods

s#bject to free trade

• NA"TA established a s$stem of tradedisp#te resol#tion


14/21


The NA"TA =ebate in the U,S,&

abor and Environment

• NA"TA reignited contention on trade polic$ inthe U,S,– 8l#e collar labor #nions feared that jobs *o#ld

migrate to so#th given 'exico%s lo*er labor costs

– Environmental gro#ps feared that 0! poll#ting U,S,and Canadian firms *o#ld move to 'exico+ and B!poll#tion *o#ld increase along U,S,-'exico border

• >olitical opposition forced Canada+ 'exico+and the U,S, to attach labor and environmentalside agreements to NA"TA


15/21


The NA"TA =ebate in the U,S,&

Immigration

• Illegal immigration is a contentio#s iss#e inU,S,-'exico relations

• Three ca#ses of migration flo*s– Demandpull !a"tors& attraction of U,S, jobs and

lo* #nemplo$ment

– Suppl#push !a"tors& economic recessions and

str#ct#ral problems in 'exico– So"ial net$or%s& migrants alread$ in the U,S,

provide contacts for ne*comers


16/21


NA"TA and Immigration

• >roponents of NA"TA arg#ed thateconomic gro*th sp#rred b$ free trade

*o#ld red#ce migration from 'exico tothe U,S,

• o*ever+ a m#ch bigger impact on

migration *ill come from agric#lt#ralreorgani?ation and mar(et opening in'exico than NA"TA


17/21


The Impact of NA"TA

on U,S, Econom$

• ocal effects of NA"TA on trade andeconom$ are dramatic especiall$ in the

U,S,-'exican border • o*ever+ 'exico%s econom$ is 76 of

U,S, econom$& NA"TA has had a ver$

modest impact on overall U,S, tradebalance and c#rrent acco#nt or on jobsand *ages


18/21


The Impact of NA"TA

on U,S,-'exico Trade

• Trade flo*s bet*een U,S, and 'exico have shot #p

• The gro*th in trade bet*een all three NA"TA

partners indicates increased speciali?ation+economies of scale+ and efficienc$

• o*ever+ the exact impact of NA"TA is hardto assess

–

8ilateral trade has expanded alread$ since 0121 than(s to'exico%s economic reforms

– 'exico%s 0114/0117 peso crisis and recession ca#sed U,S,exports to decline momentaril$ to 'exico


20/21


The Economic Impact

of NA"TA in S#m

• Canada& trade *ith 'exico is gro*ing+ b#t still

represents a small part of Canada%s trade

• The U,S,& NA"TA has had local effectsespeciall$ along the border+ b#t had a small

impact on the overall U,S econom$

• 'exico& NA"TA has had an importantimpact on trade flo*s and solidified

economic reforms


21/21

gerber ppt13

Documents