Mexico's Free Trade Agreements - NAFTA and the EU-Mexico FTA in comparison

Table of Contents

1 Introduction

2 Previous Research

3 Contents of both Agreements

3.1 NAFTA

3.2 The EU-Mexico FTA

4 Theoretical Framework of FTAs

4.1 Static Analysis

4.2 Dynamic Analysis

4.3 Political Economy

5 Development of Trade

5.1 Trade over GDP and Trade Shares

5.2 Commodity Groups

5.3 Summary

6 Econometric Analysis

6.1 Methodology: Time Series Econometrics

6.2 The Model

6.3 Regression Results - Export Demand Function

6.4 Regression Results - Import Demand Function

7 Conclusion

8 References

Research Objective and Scope

This thesis examines the impact of the North American Free Trade Agreement (NAFTA) and the EU-Mexico Free Trade Agreement on bilateral trade flows, providing a comparative analysis supported by descriptive statistics and econometric time series modeling.

• Comparative analysis of NAFTA and the EU-Mexico FTA.
• Evaluation of trade developments regarding GDP and specific commodity groups.
• Application of econometric models to identify determinants of import and export demand.
• Investigation into the influence of transportation costs versus tariff reductions.
• Assessment of whether these agreements have successfully diversified Mexico's trade partners.

Excerpt from the Book

Summary of Chapters

1 Introduction: Provides an overview of Mexico’s history with free trade agreements and defines the objective of comparing NAFTA and the EU-Mexico FTA.

2 Previous Research: Reviews existing empirical studies on the trade effects of NAFTA and the EU-Mexico FTA, highlighting the gaps this thesis aims to address.

3 Contents of both Agreements: Details the specific objectives, rules of origin, and institutional frameworks of both NAFTA and the EU-Mexico FTA.

4 Theoretical Framework of FTAs: Explains the static and dynamic economic rationales for entering free trade agreements, including concepts like trade creation, trade diversion, and political economy factors.

5 Development of Trade: Presents descriptive statistics on Mexico's trade performance, including trade-to-GDP ratios, import/export shares, and growth rates across key commodity groups.

6 Econometric Analysis: Outlines the time series methodology and models used to test the determinants of export and import demand for both trading blocs.

7 Conclusion: Synthesizes the main findings, suggesting that transport costs often outweigh tariff reductions and noting the limited success of the EU-Mexico FTA in diversifying Mexico's trade.

8 References: Lists the academic sources and data repositories used throughout the research.

Keywords

Mexico, Free Trade Agreement, NAFTA, EU-Mexico FTA, Time Series Analysis, Econometrics, Trade Creation, Trade Diversion, GDP, Export Demand, Import Demand, Transport Costs, Bilateral Trade, Maquiladora, Tariff Reductions

Frequently Asked Questions

What is the primary focus of this research?

This thesis focuses on comparing the trade effects of NAFTA and the EU-Mexico FTA on Mexico's economy, utilizing both descriptive statistics and econometric analysis.

What are the key themes addressed in the work?

The core themes include the theoretical basis for regional integration, real-world trade patterns post-agreement, the impact of transport costs, and the statistical determinants of bilateral trade flows.

What is the research goal?

The primary goal is to determine why the trade impacts of these two agreements differ and to identify which economic variables most significantly explain Mexico's bilateral trade with its major partners.

Which methodology is applied in this study?

The author employs time series econometrics, specifically estimating export and import demand functions using quarterly data and the first-differences method to ensure stationarity.

What topics are covered in the main section?

The main sections cover the background of the agreements, the theoretical framework for regional trade, longitudinal trade data analysis, and the results of regression models.

Which keywords best characterize this thesis?

Relevant keywords include NAFTA, EU-Mexico FTA, time series analysis, trade creation/diversion, and transport costs.

How does the study calculate transport costs?

The study derives transport costs by calculating the difference between the CIF (cost, insurance, freight) value of imports and the FOB (free on board) value of exports.

What conclusion does the author reach regarding the EU-Mexico FTA?

The author concludes that the EU-Mexico FTA has not significantly boosted Mexico's exports to the EU, largely due to high transport costs and stiff competition within the European market.