Economic links between Mexico and the United States: A Mexican perspective

Mario Alanis-Garza, University of Pennsylvania


The economic linkages and growing interaction between Mexico and the United States can hardly be overemphasized. Economic events happening in either country affect the other. For Mexico, the linkages are highly important. In fact, it is impossible to foresee Mexico's prospects without specific assumptions about the United States economy. This study examines the economic interaction between Mexico and the United States, and in particular, evaluates the impact on Mexico of implementing a comprehensive free trade and investment agreement (CFTIA) between the two countries. The first part reviews historical events in Mexico that bear directly on economic interactions with the U.S. The section following deals with the econometric and theoretical modeling of such links. Various total trade and bilateral trade models for exports and imports are reviewed, with an emphasis on their applicability to Mexican international trade, migration and capital flows. A special chapter discusses the implications for Mexico of implementing a CFTIA with the United States. This chapter includes background information, a discussion of the existing trade barriers, and several simulation-based trade liberalization scenarios as preliminary stages for the full agreement. The CFTIA implementation scenario was evaluated in a step-wise procedure by which, at first only tariff barriers are gradually eliminated. Subsequently, a solution is calculated by adding a removal of selected nontariff barriers in each country. The third simulation assumes that Mexico receives a significant inflow of foreign investment that is primarily intended for exports production. Finally, two versions of a CFTIA are evaluated by incorporating alternative options of fiscal stimulus that allow for closing the gap between actual and potential GDP that develops because of the higher foreign investment. As a result of the CFTIA implementation, real GDP in the year 2000 is about 8% to 10% higher than in the baseline, while employment increases 1.7 to 2.2 million over the simulation period. Real wages rise about 8.5% 9 over the period compared to 1.2% in the baseline. In addition, the CFTIA results in lower Mexico-U.S. migration and Mexico-U.S. bilateral trade, jumps from about $37 billion in 1990 to more than \$100 billion by the end of the century.

Subject Area

Economics|Latin American history|International law|International relations

Recommended Citation

Alanis-Garza, Mario, "Economic links between Mexico and the United States: A Mexican perspective" (1991). Dissertations available from ProQuest. AAI9125581.