Preliminary Outline

Preliminary Outline
Research Question: How has the North American Free Trade Agreement (NAFTA) impacted the
growth and development of the Mexican Economy?
Working Thesis Statement: Thus, to best mitigate the detriments and promote the benefits of
large free trade agreements, Mexicos economic policy should protect both the individuals and
economic sovereignty if Mexico while still maintaining strong economic growth
Lens: Economic
Perspective or Reasoning: NAFTA has caused the Mexican Industry to develop at an

unprecedented rate. (Economists and businessman)
Source: According to the U.N economic development Unit, NAFTA was able to help propel the
Mexico from being a country reliant on oil exports to an industrial powerhouse.
Source: According to the Congressional Budget Office of the U.S, NAFTA has had a substantial
effect on international investment by eliminating a number of Mexican restrictions on foreign
investment and ownership of capital and by abolishing tariffs and quotas. Thus, NAFTA made
Mexico a more profitable place to invest, particularly in plants for final assembly of products
destined for the United States.
Source: According to the Economist, the agriculture industry has grown significantly as exports
to the U.S tripled after the implementation of NAFTA due to lowered tariff rates.
Source: According to NPR, the transformation of the auto industry was the most dramatic
transformation in all three countries in NAFTA. Before NAFTA, the auto industry in Mexico was
highly protected. Resulting in low production rates and double or triple the cost of U.S cars
Mexico was able to grow its auto industry by improving infrastructure, quality and participation
in free trade agreements.
Lens: Political/Economic
Perspective: Mexicos loss of economic sovereignty (Politicians, Businessman, Economists,

Mexican Farmers etc.)
Source: According to the Center for Economic and Policy Research, recessions of the U.S will
greatly hurt U.S trading partners as well specifically noting that NAFTA partners will be the
hardest hit and that Mexico will suffer the most.
Source: According to the Center for Economic and Policy Research, Mexico suffered a recession
when the stock market bubble burst in 2000-2002, and was one the hardest hit countries in the
region during the U.S. Great Recession, with a drop of 6.7 percent of GDP. The Mexican
economy was even harder hit by the peso crisis in 1994-95, losing 9.5 percent of GDP during the
downturn; the crisis was caused by the U.S. Federal Reserve raising interest rates in 1994.
Source: According to the Wall Street Journal, Chinas export based economy poses serious
threats to Mexicos economy. Mexican steel producers had to have thousands of layoffs as
Chinese Steel producers were able to outcompete them in many markets. However, the Mexican
auto industry protested adopting protectionist policies such as a 15% tariff on Chinese steel due
to their cheaper and thus more profitable steel as the Mexican auto industry imports 90% of their
steel. Many think that Mexico is becoming a country of assembly plants which in turn is
dependent both on the producer and consumer of raw materials and finished goods.
Source: Following NAFTA, the growth of maquiladora plants skyrocketed. During the five years
before NAFTA, the maquila employment had grown at the rate of 47%; this figure increased to
86% in the next five years. The number of factories also increased dramatically. In the five years
preceding NAFTA, 564 new plants opened; in the five years following, 1460 plants opened.
However, the maquiladora growth is largely attributable to growth in US demand, and
devaluation of the peso and not NAFTA itself. In the 1970s, most maquiladoras were located
around the U.S-Mexico Border. By 1994, these were spread in the interior parts of the country,
although the majority of the plants were still near the border.
Larudee, Mehrene. "Causes of Growth and Decline in Mexico's Apparel Sector." International Review of
Applied Economics, Vol 21, September 2007. pp539-559.
Truett, Lila and Truett, Dale. "NAFTA and the Maquiladoras: Boon or Bane." Contemporary Economic Policy,
Vol 25, July 2007. pp374-386
Vietor, Richard H.K. and Veytsman, Alexander. "American Outsourcing." Harvard Business School Case Study
No. 9-705-037, rev. February 2, 2007 (Boston, MA: HBS Publishing, 2005),
Lens: Social/cultural, Economic, and Moral
Perspective: Negative Social Repercussions (Low income families, U.S residents, middle class
families)
Source: The New York Times notes that NAFTA was a short cut to converge and gain
economically without paying much attention to social implications of the deal.
Source: According to Sheldon Friedman, an economist with the AFLCIO Department of
Economic Research in Washington, DC. Wages of Mexican workers plummeted after the
implementation of NAFTA as cheap labor is necessary for Mexico to gain foreign investors and
develop their industries decreasing by 64% compared to their wages in 1982.
Source: According to the Center for Economic and Policy Research, from 1960-1980, Mexican
real GDP per person almost doubled, growing by 98.7 percent. By comparison, in the past 20
years it has grown by just 18.6 percent. Mexicos per capita GDP growth of just 18.6 percent
over the past 20 years is about half of the rate of growth achieved by the rest of Latin America.
The very poor performance of the Mexican economy contributed to a surge in emigration to the
United States. From 1994-2000, the annual number of Mexicans emigrating to the United States
soared by 79 percent. The number of Mexican-born residents living in the United States more
than doubled from 4.5 million in 1990 to 9.4 million in 2000, and peaked at 12.6 million in 2009.
Source: According to the Pew Hispanic Center, the number of people immigrating to the United
States from Mexico remained steady in the three years preceding NAFTAs implementation.
However, the number of annual immigrants from Mexico more than doubled from 370,000 in
1993 (the year before NAFTA went into effect) to 770,000 in 2000 a 108 percent increase. The
immigration surge coincided with a NAFTA-enabled flood of subsidized U.S. corn into Mexico
Source: According to the Economic Policy Institute, there has been a shift from formal, wage-
and benefit-earning employment to informal, nonwage- and benefit-earning employment under
NAFTA. Even formal employment has shifted to carrying fewer benefits than it did prior to the
pacts passage. Maquiladora employment, where wages are almost 40 percent lower than those
paid in heavy non-maquila manufacturing, surged in NAFTAs first six years. But since 2001,
hundreds of factories and hundreds of thousands of jobs in this sector have been displaced as
China joined the World Trade Organization and Chinese sweatshop exports gained global market
share.

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Preliminary Outline

Perspective or Reasoning: NAFTA has caused the Mexican Industry to develop at an

Perspective: Mexicos loss of economic sovereignty (Politicians, Businessman, Economists,

Lens: Social/cultural, Economic, and Moral

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