Edited by Roger Sugden, Rita Hartung Cheng and G. Richard Meadows
Chapter 3: Regional prosperity in a globalised economy: evidence from Mexico
3. Regional prosperity in a globalised economy: evidence from Mexico Kaye G. Husbands 1. INTRODUCTION The impact of trade liberalisation on economic welfare is typically measured by changes in the volume of trade, output, employment, productivity, and the net flow of physical and portfolio capital. While these are adequate static measures of economic activity, they do not capture a countryÕs dynamic capabilities that indicate the potential for long-term growth. Therefore, the assessment of NAFTAÕs (North American Free Trade Agreement) effect on economic welfare, for example, should take into account the influence of trade liberalisation on technological change, especially in the case of Mexico. MexicoÕs road to internationalisation has taken about 20 years. Protectionist policies of the 1960s and early 1970s gave way to export promotion and tariff reduction policies in the late 1970s through to the present. Mexico joined the GATT (General Agreement on Tariffs and Trade) in 1986, NAFTA was initiated in 1994, and Mexico is now poised to be a part of the Free Trade Agreement of the Americas in 2005. The reconfiguration of MexicoÕs industrial structure accompanied the move to freer trade. Industrial policies that protected infant industries in the 1960s were replaced by government policies in the 1990s, which granted national (Mexican) status to foreign (non-indigenous) firms. As trade liberalises and as most barriers to ownership of capital by foreign companies fall, foreign companies are increasingly becoming the sources of local production and innovation. The critical question of this chapter is: does...
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