Regional Trade Agreement: Mexico Case Study

Regional Trade Agreement: Mexico Case Study

Introduction

Regional Trade Agreement (RTA) impact positively as well as negatively on trading. The designing and implementation of regional trade agreement with reference to broader policy is crucial. RTA is design to improve the economic reforms but the reform became fruitless because coherent program of reform declined. Regional trade agreement is designed to create formal policies for all the trade related issues, and RTAs are signed for number of reasons. Since 1990s, regional trade agreements have become prevalent increasingly. Mexican economy has became liberal and integrated in the after the formation of Regional Trade Agreement (RTAs). WTO has defined certain rules and regulations for to get enrolled in Regional Trade Agreement (RTA) but terms and conditions are applied to be the authorized member.

Mission and Structure of the RTA

The main aim of Regional trade agreement is to cover the trade barriers by designing formal policies. The main difficulty that been identified in an agreement are the fostered wider political objectives without achieving the economic integration. In political context, it is clear that integration of the broad environment is crucial to determine the trade impact on economy.

Discussion

Mexico's is the most significant trading partner in terms of free trade agreement. According to Villarreal (2012) almost 80% of Mexico's exports go to the United States and about 50% of Mexico's imports are supplied by the United States. Mexico has taken several initiatives to grow country economy in positive way; Mexico increased trade with more than 44 countries and had 12 free trade agreements. In context to globalization, US pushed Mexico to expand the free trade across the globe (Villarreal 2012).

NAFTA is based on the Free Trade Agreement between Mexico, U.S. and Canada. This agreement has been signed on 1st. January 1994 and gradually eliminates tariffs on trade between the U.S., Canada and Mexico for 15 years. The supplementary agreements required to apply its labour and environmental laws.

Estevadeordal & Suominen (2004) explained, U.S. trade with Canada and Mexico increased 29 percent in the first two years of NAFTA. However, there are still trade disputes between partners and it is mitigated to some extent by dispute settlement mechanisms. America is commencing the negotiation with Mexico on TPP trade agreement.

Motivations for Trade Integration

There are several reasons for the countries, including political and security factors, to enter in the regional trade agreements but economic motivation is the major driven force to enroll in the RTA. To expand the export market, Mexico tries to achieve the economies of the scales in different economic sectors. According to Villarreal (2012), RTA provides broad market access to all the partners for their goods and services. There are certain benefits that countries get from this agreement to lower down unit costs from the producers for the regional market, in addition to their own domestic market. Unit of goods or services and cost production are inversely proportional to each other if more units of a good or a service can be produced at large ...