Trade liberalisation in Mexico and its impact on exports, imports and the balance of payments

The aim of this thesis is to disentangle the effects of trade liberalisation during the mid1980s from the trade liberalisation involved in the North American Free Trade Agreement (NAFTA) on exports, imports and the balance of payments in Mexico, at the aggregate and disaggregated level. The main empirical results suggest that the trade reforms during the mid-1980s had a significant impact on trade, exports and imports; however, the effects of NAFTA are negligible. In spite of the fast rate of manufacturing exports, the most dynamic sector, imports have increased even faster. Therefore, trade liberalisation has worsened the trade balance. In addition to this, the evidence presented in this thesis shows that more liberalised trade has not contributed to an improved economic performance in Mexico, as promised a decade ago, before NAFTA came into effect, by the leaders of Canada, Mexico and the US. However, NAFTA has locked-in Mexico's trade and foreign investment policy, easing the access of multinational firms to the country but with minimum forward and backward linkages to the domestic economy. It is corroborated that Mexico's economic performance is constrained by the external sector and trade liberalisation has contributed to reinforcing the dependence of domestic industry on imports.