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Trading Views From Professor Arvind Panagariya: Sir--You
note that Mexican exports to the United States have surged in the past two
years. You also note that only 117,000 American workers have come
forward to claim the benefits offered to those displaced by NAFTA. Taken
in isolation, each of these facts may be a cause for celebration. But
taken together, they strongly suggest that much of the NAFTA-induced
growth in Mexico's exports has come at the expense of other countries and
thus constitutes trade diversion. Second,
you report that big American and Mexican textile-and-clothing firms have
been busy setting up joint ventures that use local inputs. This is also
being driven, in large part, by the triple-transformation rules of origin
in NAFTA: NAFTA trade preferences can be availed of only if a substantial
part of the value-added is local. This creates an incentive to use local
inputs even if the most efficient suppliers of those inputs are outside
the NAFTA region This growth in Mexico's exports--and increased use of
local inputs--could be a good thing if they resulted from the peso's
devaluation rather than from NAFTA trade preferences.
This may well be so. But in that case, the title of your piece
should have been "The peso effect", and surely no conclusion
should have been drawn in favour of NAFTA's extension to the south. Economist, July 26 1997 |
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