Lessons from NAFTA: For Latin America and the Caribbean

Jan 2005
Analyzing the experience of Mexico under the North American Free Trade Agreement (NAFTA), 'Lessons from NAFTA' aims to provide guidance to Latin American and Caribbean countries considering free trade agreements with the United States. The authors conclude that the treaty raised external trade and foreign investment inflows and had a modest effect on Mexico's average income per person. It is likely that the treaty also helped achieve a modest reduction in poverty and an improvement in job quality. Finally, the study provides some lessons for the structure of such agreements. In particular it illustrates the shortcomings of some aspects of the NAFTA treaty, specifically those related to the rules of origin which have severely limited the capacity of Mexican firms in many sectors to take advantage of NAFTA preferences, and related to the supervision panels that do not appear to have made a major impact on the incidence of disputes and the effectiveness of their resolution either before or after NAFTA. This publication belongs to the Latin American Development Forum Series (LADF), sponsored by the Inter-American Development Bank, the United Nations Economic Commission for Latin America and the Caribbean, and the World Bank.