{
  "id": "97-811",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "97-811",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 103335,
      "date": "1997-09-02",
      "retrieved": "2016-05-24T20:57:52.889941",
      "title": "NAFTA, Mexican Trade Policy, and U.S.-Mexico Trade: A Longer Term Perspective",
      "summary": "The North American Free Trade Agreement (NAFTA) has been in place for over three years, and\nCongress continues to evaluate it as part of the trade policy process. \"Free trade\" is a contentious\ndebate and has become even more complicated in the NAFTA context because of Mexico's 1995\neconomic crisis. Many critics consider the sudden shift from surplus to deficit in the U.S. trade\nbalance with Mexico a clear indication of NAFTA's failure. Others see NAFTA as a positive force\nsupporting U.S. exports. To sort out the effects of trade agreements, this report evaluates the U.S.-\nMexico trade relationship over the past two decades to place recent events and NAFTA in a broader\neconomic context.\n  Over time, U.S.-Mexico trade has grown and diversified as the two economies have become\nincreasingly integrated. Yet, trade patterns have been volatile at times for many reasons, including\neconomic downturns in Mexico. To understand the role of trade policy and agreements on trade\nflows, it is instructive to compare Mexico's 1982 and 1995 economic crises because in the first\nMexico operated under a closed trade policy and in the second it had recently acceded to NAFTA\nas part of a long-term transition to an open trade policy. Both downturns had similar antecedents: \nan overvalued peso, a balance of payments crisis, large capital outflows, and a currency devaluation. \nBoth were also severe, but the trade effects on the United States proved much worse in the first\ninstance.\n  With Mexico's 1995 balance of payments crisis, the United States saw its bilateral trade balance\nfall into a large deficit position, as it did in 1982. However, U.S. exports to Mexico declined by only\n11% in 1995, compared to 34% in 1982 and 23% in 1983. Yet, in 1995, Mexico's economy had\ncontracted more severely than earlier, with GDP falling 6.2% compared to 0.6% and 4.3% in 1982\nand 1983. A critical difference in the trade effects between the two periods was Mexico's change\nin trade policy, particularly adopting NAFTA, which kept Mexico from raising barriers to U.S. trade\nin response to the crisis.\n  The 1995 decline in U.S. exports to Mexico was due to the recession-induced fall in demand\nand the price effects of the peso devaluation.  What the decline does not reflect is a trade policy\nbent\nto restricting the flow of imports from the United States, which was in place in 1982, but absent in\n1995 . NAFTA solidified Mexican commitments to an open trade policy and actually\ncushioned U.S.\nexports from a more serious fall. Further, the trade deficit with Mexico has not been a major\neconomic problem for the United States as a whole given its global trading position. Finally, under\nfreer trade conditions, economists generally have expected U.S. exports to Mexico to recover more\nquickly from the 1995 decline than they did from the 1982 crisis under a closed Mexican trade\npolicy, which so far seems to be the case.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": false,
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      "topics": []
    }
  ],
  "topics": [
    "Economic Policy",
    "Foreign Affairs",
    "Industry and Trade"
  ]
}