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TRANSCRIPT
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Chapter 13
Economic
Integration
into North America
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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
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Introd#ction& Characteristics
of the North American 'ar(et
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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
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Trade "lo*s in North America
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FIGURE 13.1 U,S, 'erchandise
Trade *ith Canada
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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
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'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
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'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$ments of the principal of its debts
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The 012:s& The ost =ecade
• 012:s *as the lost decade in atin America& gro*th *as nonexistent+
foreign capital stopped flo*ing in+ creditbecame scarce+ investment declined
• The economic crisis stemmed from
macroeconomic mismanagement& largegovernment expendit#res hadincreased borro*ing and indebtedness
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3esolving the =ebt Crisis
• 'exico agreed on b#dget c#ts and
peso deval#ation in ret#rn to
restr#ct#ring the debt repa$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
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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
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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
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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
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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
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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
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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
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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
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FIGURE 13.&
U,S, 'erchandise Trade *ith 'exico
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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
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