The Creation of a Free Trade Agreement between the United States and Mexico. The Implications for Mexican Development and the United States Economy
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Authors
Padilla, James J., Jr.
Issue Date
1991
Type
Thesis
Language
en_US
Keywords
Alternative Title
Abstract
The research for this SIP included extensive use of the
University of Michigan Graduate School Library and Business School
Library. In addition interviews were conducted with Ford Motor
Company's public policy analyst and international economist at the
Dearborn, Michigan, World Headquarters Building. Interviews were
also· conducted at the Ford Hermisillo Stamping and Assembly Plant
in Hermisillo, Mexico, with the Plant Controller and other members
of the plant management.
The free trade agreement will be a break with the
historical precedences of both countries. As recently as the 1970's
Mexico engaged in trade practices that sharply restricted the inflow
of foreign trade. The United States has never offered the same
scenario for unlimited trade to a developing country. The position of
Mexico as a developing country makes this trade agreement unique.
Models of economic development show the United States
and Mexico i.n complementary development stages. The reality of the
U.S.'s and Mexico's current economic states further emphasizes this
theoretical basis for trade. Comparative advantage and analysis of
the HO model place Mexico and the United States on the polar
complementary scale of being la~or intensive and capital intensive.
The Mexican government's objective of continued development will
cause them to look beyond the immediate gains to consumerism
when applying their comparative advantage.
Opposition to the free trade agreement exists but only
through a skewed analysis of its real effects. The points of
contention raised by free trade opponents should serve as a guide to
negotiators in their attempts to implement free trade at a pace that
will avoid staggering blows to either economy.
The introduction of U.S. industry and consequentially
capital and technology, will help Mexico to break through its
developmental rut. Modernized industry and free trade industry that
already exists in Mexico will serve as a guide to new industry
inflows. Wage rates and productivity are both anticipated to
experience unprecedented growth. Thus, the standard of living
should increase in Mexico.
The implementation of a properly timed free trade
agreement coordinated with the fixing of the peso to the U.S. dollar
should help Mexico to relieve its debt burden. The relationship will
then proceed to resemble that of the European Economic Community.
The implications of a free trade agreement go beyond the
current trade zone and success in a U.S.-Mexican trade agreement
should lead to interest on the part of other Latin American
countries. The possibility of an expansion of trade relations will be
tied with the development needs of these countries as well.
Description
viii, 83 p.
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U.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.