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Trade Liberalization Lecture # 14 Week 7. Structure of this lecture Theoretical arguments for trade liberalization Reasons for liberalizing trade in Latin.

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Presentation on theme: "Trade Liberalization Lecture # 14 Week 7. Structure of this lecture Theoretical arguments for trade liberalization Reasons for liberalizing trade in Latin."— Presentation transcript:

1 Trade Liberalization Lecture # 14 Week 7

2 Structure of this lecture Theoretical arguments for trade liberalization Reasons for liberalizing trade in Latin America How did Latin America liberalize trade Results so far Case Study: NAFTA

3 Theory

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16 Case Study:MEXICO Middle income country High income inequalities 54.6 (higher than Argentina’s) Population: 109 000 000 Per capita income: one fourth of US Increasingly dominated by private sector in: Industry: food, beverages, tobacco automobile, chemicals, tourism State-owned: Petroleum, mining, Natural gas Free market economy: NAFTA, and Many other bi-lateral free trade agreements

17 NAFTA: North American Free Trade Agreement (1994) Mexico, USA, and Canada Largest in the world in the world in GDP purchasing power Criticisms and controversies: - Canadian disputes - Impact on Mexican farmers - Immigration debate - US deindustrialization…….

18 Export performance

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20 But Non Tradable output also contributes to GDP growth

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22 -Banking crisis (“Tequila Crisis”) after trade liberalization and NAFTA

23 Credit crunch contributed to N-sector stagnation Another contributing factor: slow pace of structural reforms Corrective measures? Eliminate “bottlenecks” in the N- sector via: Improve contract enforceability Structural reforms in key sectors such as energy → Next Class: Privatization. Case Study: TELMEX Have a nice weekend -


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