| This dissertation explores the economics of Mexican trade policy. Part One surveys theoretical considerations relating to trade liberalization. This is followed by a chronological review of Mexican trade policy from 1940 through 1991.;The impact of Mexican trade liberalization during 1985-90 is examined within the context of a reduced-form partial equilibrium model. The results using quarterly data strongly suggest that liberalization was associated with favorable structural changes in functions characterizing exports, capital good imports, employment, and operating profits. However, the Mexican trade deficit increased dramatically after 1989. Evidence on structural changes and elasticity estimates suggest that this deficit increase was due to low U.S. growth coupled with high Mexican growth, rather than to the trade liberalization policy itself. I also document a sizeable post-liberalization increase in the foreign income elasticity of demand for Mexican non-oil exports, which portends well for a turnaround in the trade deficit.;Part Two focuses on the policy debate surrounding the formation of a North American Free Trade Area which would include the U.S., Canada, and Mexico. The potential benefits of such an arrangement are examined using theory of trade creation versus trade diversion, as well as graphical supply-demand analysis. Given the characteristics of the countries involved in the negotiations, the Free Trade Agreement should be beneficial for all of them, and provide a means for increased interaction within the new global environment of emerging trading blocks. |
