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The promises of Free Trade and the effects of NAFTA in Mexico

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The promises of Free Trade and the effects of NAFTA in Mexico
The promises of Free Trade and the effects of NAFTA in Mexico.
By abc
May 7th, 2013

Introduction to International Studies, Boston College
Prof. Peter Krause

Abstract: Developing countries are participating in bilateral and multilateral trade agreements in record numbers. Despite their eagerness to enter into the global market, fears remain that free trade with large industrialized nations will erode infant industrial sectors, hindering the process of economic development. The aim of this paper is to answer a central question: what are the positive/ negative effects of trade liberalization on the developing country’s economy? This paper will examine NAFTA and the effects it has had on the Mexican economy.

INTRODUCTION
One of the striking features of global integration is the increasing importance of international law as a governing institution for state-market relations1. Since 1995, the World Trade Organization (WTO) has seen a dramatic increase in the number of free trade agreements (FTAs). Developing countries are participating in bilateral and multilateral trade agreements in record numbers. Despite their eagerness to grasp part of the economic benefits of entering into the global market, there are still fears that free trade with large industrialized nations will erode infant industrial sectors, hindering the process of economic development. The aim of this paper is to answer a central question: what are the effects of trade liberalization on the developing country’s economy? Is the impact positive or negative?
Research by Frankel and Romer suggests that trade raises income. The International trade theory suggests that countries should specialize in the products of their comparative advantage. And by accessing the larger international market, small countries can benefit from economies of scale that might not be possible under limited domestic markets.
However, experience has shown that openness is not a favorable trend for
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