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The Effects of NAFTA on U.S.-Mexican Trade and GDP |
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May 2003 |
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![Cover Graphic](docimages/42xx/doc4247/4247-CoverPhoto.jpg) © Photodisc/GettyImages |
Notes
Unless otherwise indicated or apparent, all time-series values in this
paper are quarterly and are seasonally adjusted. Similarly, unless otherwise
indicated, all rate series--such as exports in billions of dollars or gross
domestic product--are annual rates.
Data series for exports and imports were constructed from three compilations
of trade data from the Bureau of the Census: the Interactive Tariff and
Trade Data Web on the Web site of the International Trade Commission (www.usitc.gov); Direction of Trade Statistics, published by the International Monetary
Fund; and the Haver Analytics database. The export values used are the
free alongside ship (f.a.s.) values of total exports. The import values
used are the customs values of general imports.
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The North American Free Trade Agreement (NAFTA)
went into effect on January 1, 1994, creating a free-trade area encompassing
the United States, Canada, and Mexico. Since then, agreements have been
proposed--and, in some cases, negotiations begun or even completed--for
a Free Trade Area of the Americas and free-trade areas with a number of
other countries of varying degrees of development. Consequently, assessing
the effects of NAFTA is relevant to current debates about trade policy.
This Congressional Budget Office (CBO) paper--prepared at the request
of the Chairman of the Senate Committee on Finance--examines aggregate
U.S.-Mexican trade in goods in the first eight years after NAFTA went into
effect and how it has been affected by the agreement and by other factors.
The paper provides quantitative estimates of the effects of NAFTA on that
trade and of the resulting effects on U.S. gross domestic product. (The
paper focuses on U.S. trade with Mexico because U.S. trade with Canada
had already been substantially liberalized in accordance with the Canada-United
States Free Trade Agreement before NAFTA went into effect.)
Bruce Arnold of CBO's Microeconomic and Financial Studies Division prepared
the paper under the direction of Roger Hitchner and David Moore. Charles
Capone, Robert Dennis, Tracy Foertsch, Douglas Hamilton, Juann Hung, Rob
McClelland, and Thomas Woodward of CBO provided valuable comments, as did
Gary Hufbauer of the Institute for International Economics and David Gould
of the Institute of International Finance, Inc.
Christian Spoor edited the paper, and Christine Bogusz proofread it.
Kathryn Winstead prepared the paper for publication, Lenny Skutnik produced
the printed copies, and Annette Kalicki prepared the electronic versions
for CBO's Web site.
Douglas Holtz-Eakin
Director
May 2003
Tables |
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1. |
Effects of NAFTA on U.S. Goods Trade with Mexico |
2. |
Effects of NAFTA on U.S. Gross Domestic Product |
3. |
CBO's Estimates of the Effects of NAFTA Compared with Others in the
Literature |
A-1. |
Estimates and Statistics for Long-Term Equilibrium Equations for U.S.-Mexican Trade |
A-2. |
Estimates and Statistics for Dynamic Error-Correcting Equations for
U.S.-Mexican Trade |
C-1. |
Effects of NAFTA on U.S. Goods Exports to and Imports from Mexico by
CBO's Standard and Alternative Methodologies |
C-2. |
Effects of NAFTA on the U.S. Goods Trade Balance with Mexico by CBO's
Standard and Alternative Methodologies |
C-3. |
Effects of NAFTA on U.S. Gross Domestic Product by CBO's Standard and
Alternative Methodologies |
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Figures |
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S-1. |
U.S. Trade in Goods with Mexico |
S-2. |
Real Exchange Rates for U.S. Trade in Goods with Mexico |
S-3. |
Mexican Industrial Production and Real Gross Domestic Product |
S-4. |
U.S. Balance of Trade in Goods with Mexico Under Alternative Scenarios |
1. |
Tariff Rates on U.S.-Mexican Trade Before and After NAFTA |
2. |
U.S. Goods Trade with Mexico |
3. |
Mexico's Share of U.S. Goods Trade with the World |
4. |
U.S. Goods Trade Balance with Mexico |
5. |
U.S. Goods Trade Balance with Mexico and with the World |
6. |
U.S. Goods Trade with Mexico as a Share of U.S. Goods Trade with the
World |
7. |
Crude Oil as a Share of U.S. Goods Imports from Mexico |
8. |
Real Exchange Rates for U.S. Goods Trade with Mexico |
9. |
Mexican Industrial Production and Real Gross Domestic Product |
10. |
Net Foreign Investment in Mexico |
11. |
U.S. Goods Trade with Mexico with and Without NAFTA |
12. |
U.S. Goods Trade Balance with Mexico Under Alternative Scenarios |
B-1. |
Real Exchange Rate for U.S. Goods Exports to Mexico Under Alternative
Scenarios |
B-2. |
Mexican Industrial Production Index Under Alternative Scenarios |
B-3. |
Real U.S. GDP Under Alternative Scenarios |
C-1. |
U.S. Goods Trade with Mexico by CBO's Alternative Methodology |
C-2. |
U.S. Goods Trade Balance with Mexico by CBO's Alternative Methodology |
C-3. |
U.S. Goods Trade Balance with Mexico Under Alternative Scenarios by
CBO's Alternative Methodology |
C-4. |
Actual U.S. Goods Trade Balance with Mexico Under Alternative Scenarios
by CBO's Alternative Methodology |
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Boxes |
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1. |
NAFTA and Foreign Investment |
2. |
The Effects of Trade Creation and Trade Diversion |
3. |
Trade Balances with Individual Countries Versus the Balance with the
Entire World |
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