From NAFTA to USMCA: Can a Good Idea that Came Too Late Be Born Again?

Abstract

This article analyzes from the trade perspective the lower-than-expected growth dividends of the export-led strategy adopted by Mexico in the 1990s. Particular attention is given to employment, labor productivity, and regional outcomes. The North American Free Trade Agreement (NAFTA) caused Mexican exports to skyrocket in the first years of its implementation. This initial lift was quickly sapped by China's emergence after its entry into the World Trade Organization (WTO) in 2001. Recent years witnessed a renewed dynamism of Mexican presence in the U.S. market. In an international context marked by deglobalization and decoupling, this rebound is expected to continue under the United States-Mexico-Canada Agreement (USMCA). Yet, in order to deliver economic growth, Mexico needs to diversify the geographical location of its exporting industries. The analysis of Mexican exports shows also that idiosyncratic weaknesses, such as the low contribution of the business services sector or the deficient trade and transport infrastructure, must be addressed.