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Economic History > Regional Trade Agreement (NAFTA) (chap 7) > Flashcards

Regional Trade Agreement (NAFTA) (chap 7) Flashcards

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1
Q

Mexico - Import Substitution Industrialization (ISI)

A
  1. Inefficient industries without economics of scale
  2. Large Government Subsidies
  3. Budget Deficit
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2
Q

Member in NAFTA?

A
  • Canada
  • Mexico
  • USA
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3
Q

what association was previous NAFTA?

A
  • CUSTA , canada and USA,

it finish with NAFTA in 1994

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4
Q

what is the diverging size of the member of NAFTA? (GPD)

A
  • canada is 85% of USA GDP

- Mexico is 30% of USA GDP and 36% of Canada

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5
Q

What was Canada mayor trade agreement ?

A
  1. The auto pact (1965)

2. The Canadian- US free trade agreement (CUSTA)(1989)

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6
Q

What consequence had the Auto pact (1965)?

A

-car producers produced some models in Canada and other in the USA , for the entire North American market

  • Canadian export grew by 169%(1963-1969)
  • productivity in Canadian industry caught up with US
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7
Q

Justification for CUSTA? (Canada)

A
  1. the danger to Canada of increasing US protectionism

2. Productivity in canada should increase if they are force to compete with imports

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8
Q

objections against CUSTA?(Canada)

A
  1. Canada lacked of economies of scale as the US
  2. Canada might have to abandon social programs in order to reduce taxes to the US levels
  3. threat to Canadian cultural industries
  4. Increase of foreign ownership of Canadian firms
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9
Q

How CUSTA workout for Canada?

A
  1. employment and productivity still in debate ( -15% industries most affected), long run +17%
  2. There were cuts in social programs duo contractionary policies
  3. Cultural Industries are not part of the treaty
  4. The General trend in the 80’s was pro- FDI , Taxes reduced with or without NAFTA
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10
Q

what was the motivation for NAFTA? (Canada and Mexico )

A

Canada was trade

Mexico was to reassure foreign investment

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11
Q

what was the cause of Mexican’debt crisis ?

A
  • The large portfolio borrowed from the international financial market
    (after Mexico had been force to IMF stabilization package 1976, 70’s oil price were high, 78 new reserves of oil in Mexico )
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12
Q

When the bonanza of Mexico finish ?

after the IMF stabilization

A

1982 with the debt crisis

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13
Q

the reasons of the end of mexican’ bonanza ?

after the IMF stabilization

A
  1. The rise of world interest rate (US federal reserve contractionary policies agains inflation)
  2. world oil prices fall (- export , + debt )
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14
Q

what Mexico announce in 1982? and what consequence it had?

A
  • In 1982 announced the suspension of the debt principal (not interest)
  • it cause the collapse of international lending ( Latin America , Africa ,eastern Europe)
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15
Q

what happens in The Lost Decade ?(in Mexico)

A
  • Foreign Capital stopped flowing in
  • Debt repayment flowed out
  • GDP grow was nearly zero
  • Real income fell 15% (1982-1986)
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16
Q

what consequence had the IMF intervention in Mexico ?

A
  • The restructuring of the debt payments
  • Small quantity of new loans
  • Mexico agreed to budget cuts and devaluation
  • inflation (as import cost rose)
  • Fall in real incomes (1982-1986)
17
Q

what actions were taken in the structural reform in Mexico ?

A
  • Reduction of the budget deficit
  • Reduction of state intervention policies
  • Increase in Pro-market policies
18
Q

which presidents did the structural reform in Mexico?

A
  • President Miguel de la Madrid began (1982-1988)

- President Carlos Salinas speed up (1988-1994)

19
Q

How Mexico solved it credibility problem?

A
  • Mexico join the US and Canada in NAFTA
  • Capital inflow into Mexico
  • By binding future Mexican government in a treaty assuring not drastic change
20
Q

What is the Maquiladora?

A
  • It is an EPZ (export processing zones) close to the U.S border
21
Q

when was the Maquiladora created?

A
  • In 1965 , in Mexico Border Industrialization Program (BIP), set up the EPZ
22
Q

what firms could do in the Maquiladora ?

A
  • Could set up assembly operation in the EPZ with out paying tariffs on imported parts (but they had to exported in finish goods)
23
Q

When was the maquiladora closed and why?

A
  • under NAFTA the EPZ program phased out (by 1 January 2001) but the area or maquila continuo to flourish
24
Q

what was the max point in the maquiladora ?

A
  • After 1982 , greater encouragement

- 1998 , employed nearly 1 million workers and produced 1/3 of Mexican manufactures.

25
Q

what Provisions had NAFTA?

A
  1. Most trade barrier have been removed
  2. There are north American content requirement
  3. There is a dispute resolution mechanism
26
Q

who were most affected by trade barriers change?(NAFTA)

A
  • Mostly in the Mexican side

- Canada and US had low tariff before NAFTA

27
Q

what the provisions in content requirement said :(NAFTA provisions )d

A
  • At least 50% of a good must be made in North America to qualify for tariff reduction
  • This is to expect in a free trade agreement where there is not external tariff
  • otherwise one member could import from non-menber and re-export them with free tariff
28
Q

what the dispute resolution mechanism do? (NAFTA provisions )

A
  • resolve conflicts between two member in a binational panel
29
Q

what concerns had U.S about NAFTA?

A
  • Labour
  • Environment
  • Immigration
    (mostly again Mexico)
30
Q

what is the Pauper Labour argument ?

A
  • Is the fear of losing job, by the lowest wages in other countries members
  • False: It discard labour productivity
31
Q

what is the Pauper Labour argument counter-example?

A

country A: wage 20 , produces 5
country B: wage 10, produce 2
- country A is more profitable , even with higher wages.

32
Q

True about the Pauper Labour argument ?

A
  • Jobs in low skill sectors might be threaten , because there is not mayor difference between countries.
  • Since higher productivity in the U.S (and Canada) than Mexico , there is no danger that all job will go to Mexico
33
Q

what is the side agreement on labour ? (NAFTA)

A
  • Each country enforce its own labour laws relating to child labour, minimum wages and workplace safety .
    (critics say it is toothless)- no resolve anything
34
Q

what environmental issues exits in NAFTA?

A
  • Transboundary pollution from cities neighbouring the U.S (Tijuana, Ciudad Juarez)
35
Q

what the Side agreement on the environment say?

A
  1. A mechanism was establish for investigating environmental disputes
  2. The North American Development Bank (NADbank)
    was to provide funds for border cleanup cost.
36
Q

Immigration Issue of NAFTA:

A

300,00-400,000 ilegal immigrants from Mexico to U.S

  • supporter of NAFTA say that the improvement of Mexico economy will change that
  • Agricultural reforms have push small farmers off the land, causing emigration (some) , not entirely to NAFTA but it have a role
37
Q

General impact of NAFTA:

A

Mexico was the most affected, but the benefits is reduce with the competition of China and India
U.S and Canada had limited effected because it already had CUSTA

Economic History (8 decks)

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