NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Political Economy of Mexico's Entry to NAFTA

Aaron Tornell, Gerardo Esquivel

NBER Working Paper No. 5322
Issued in October 1995
NBER Program(s):   ITI   IFM

In this paper, we derive three lessons from Mexico's experience. First, deep reforms like trade liberalization are not likely to happen by government decree. Instead, they usually come about when the unanimous blocking of reform by powerful elites breaks down. In the case of Mexico, this happened during a fiscal crisis, when some groups tried to displace other groups in order to capture a greater share of fiscal revenue. Second, in the presence of entrenched elites, the sustainability of reform depends on the existence of new groups that benefit from the new status quo and have enough power to defend it. Thus, the speed of successful reform is determined by the speed with which new groups are consolidated. Initially, Mexico limited radical liberalization to the manufacturing sector. The government has only recently begun to undertake serious liberalization in the services and agriculture sectors. The third lesson we take from Mexico is that the importance of formal agreements like NAFTA lies not so much in the ability of these agreements to reduce average import tariffs among their parties and improve their terms of trade vis   vis the rest of the world, as claimed by the optimal tariff literature, but in that they serve as commitment devices to force reforms to continue.

download in pdf format
   (811 K)

email paper

This paper is available as PDF (811 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5322

Published: The Political Economy of Mexico's Entry into NAFTA, Aaron Tornell, Gerardo Esquivel Hernández. in Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, Ito and Krueger. 1997

Users who downloaded this paper also downloaded these:
Tornell and Esquivel Hernández The Political Economy of Mexico's Entry into NAFTA
Tornell, Westermann, and Martinez w10289 NAFTA and Mexico's Less-Than-Stellar Performance
Hanson w9563 What Has Happened to Wages in Mexico since NAFTA?
Krueger w7429 Trade Creation and Trade Diversion Under NAFTA
Lane and Tornell w6502 Why Aren't Savings Rates in Latin America Procyclical?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us