NAFTA: Benefits, Challenges, and the Gravity Model

Features of MRTA

In the best cases, RTAs can serve as catalysts of deeper trade liberalization, focal points of inter-state cooperation, incubators of new WTO+1 trade rules, drivers of Foreign Direct Investment (FDI), and testing grounds for mechanisms to adjust to a more open trading environment.

Challenges of NAFTA

First, the business of shipping goods across borders needs an overhaul. Crossing from Mexico to the United States, waiting times are far too long; much of the infrastructure is antiquated; railway and haulage crews still change over at the border. Measures to allow the pre-clearance of goods before they reach the frontier are held up by America’s needless insistence that its customs agents should be allowed to carry guns, against Mexican laws, when they operate south of the border. NAFTA could also do more to avert the negative effects of regional trade deals. Such deals risk diverting trade from countries outside the club to those inside it. NAFTA should show how regional deals can be bridges to wider liberalisation. The United States, Canada and Mexico have each pursued free-trade agreements with the European Union separately, for example; instead, they should act in concert. NAFTA itself should also map out a way to invite in new members from Central America, the Caribbean and Latin America, to spread free trade across all the Americas. Third, the bloc should embrace the freer movement of people. NAFTA had virtually nothing to say about labour mobility at its launch, beyond creating a visa category for “professionals”. The United States is not about to embrace European-style open borders, but more generous dispensations for frequent travellers from Mexico would be a start.

Benefits of NAFTA

Manufacturing

NAFTA has allowed the three countries to take advantage of niches and specialize in those areas. From raw materials to finished product, NAFTA opens doors and allows the three nations to remain competitive on the world market.

Jobs

NAFTA has created a vibrant employment marketplace that allows each country to use the strength of the agreement to bolster existing talent and set the stage for future job growth.

Less Expensive Goods

A number of NAFTA benefits drive the cost of consumer goods down in all three countries. The creation of a single trade area allows companies to achieve much better economies of scale.

Agriculture

Agriculture has seen tremendous gains for all parties under NAFTA. American exports of agricultural products to Canada and Mexico have increased dramatically since NAFTA came into force, and now account for over 30 percent of all exports.

Mexican History

Mexico— has been NAFTA’s biggest beneficiary. Import competition has improved Mexican manufacturing productivity; foreign direct investment has surged. More important, membership of NAFTA has shored up Mexico’s domestic political commitment to open markets, and provided a template for the country’s other free-trade agreements (14 and counting). The deal has not closed the vast income gap with Canada and America (see article), but it has helped make Mexico more stable and prosperous.

Gravity Model

Distancia

Se utiliza para medir muchas barreras al comercio: Costes de transporte, El paso del tiempo en el transporte, Pérdida por accidente (El barco se hunde) Pérdidas por caducidad (productos perecederos), Pérdida por impago a la llegada del producto Costes de transacción, Distancia cultural (lenguaje, religión, valores, costumbres, prácticas empresariales), Papel de las fronteras.

Costes de comercio

Costes de aduanas, Costes de conversión de la moneda, Costes de comunicación, costes de transporte, costes de viajar.

Costes de conversión de divisas

Tasas de conversión, Volatilidad del TC, Ausencia de transparencia de precios

Predictions

Un día extra en aduanas reduce el comercio bilateral un 1%./ En términos equivalentes de distancia, significa que un día de retraso equivale a tener que recorrer 70kilómetros más para comerciar./ Países sin acceso al mar son particularmente sensibles al costo del tiempo: Un día extra de retraso reduce el comercio hasta un 4 %./ La corrupción reduce el comercio./ Cuando las barreras arancelarias son muy altas, la corrupción ayuda al comercio