2012-09 Trade and the development gap

In this chapter, we analyze the realities of U.S.-Mexican trade and its impact on Mexico in terms of economic convergence, foreign investment, employment, wages, and income distribution since Mexico began to liberalize its trade in the late 1980s and subsequently joined NAFTA. We show that, up to the present, liberalized trade in general and NAFTA in particular have failed to fulfill the promise of closing the Mexico-U.S. development gap, and we argue that this was partly a result of the lack of deeper forms of regional integration or cooperation between Mexico and the United States. We also explore other factors that could explain this negative outcome, and we briefly discuss the opportunities for both Mexico and the United States to mutually benefit from a further economic integration process.