The NAFTA is an economic structural change in the region. It aims to intensify the regional trade, eliminating the tariff and non tariff barriers and expanding liberalization in investment and other policies. The trade relationship between the U.S. and Canada has altered little by the NAFTA while it has major effects on the trade relationship between the U.S. and Mexico. In my project, the linkages of trade liberalization, economic growth, and poverty reduction in Mexico will be addressed.
Firstly, the project will investigate the predictions made by NAFTA and then it will examine how much of the predictions have been realized in the region. My project will focus on the changes in average output and income as well as the directions of the changes and magnitudes. This findings will enable us to say whether the Mexican economy follows the so called ‘openness- growth’ path. If so, then, whether the output and income changes are sustainable or not? Secondly, my project will investigate the sectoral distribution of the output and income changes in the Mexican economy. This can identify the sectors which are mostly benefitted from the liberalization and whether those affected sectors can contribute to the long term changes in aggregate output and income of the economy.
Lastly, my project will analyze the functional distribution of output and income and check whether NAFTA has increased poverty in Mexico. Changes in real wage, wage gap between skilled and unskilled labor, quality of jobs and labor standard issues are to be addressed in order to examine the poverty situation. My project will provide an assessment of the trade adjustment costs and policy tools to ease the adjustments. The policy implications of this project can include future guidelines for designing the trade adjustment policies at a lowest cost of the economy to compensate those who lose from freer trade.