The Effects of NAFTA and Domestic Reforms on the Development of Mexico’s Agriculture Sector

For my thesis, I analyze effects of recent political developments on the development of Mexico’s agriculture sector. In 1994, Mexico joined NAFTA, sparking major change in many of Mexico’s major industries as a result of lifted trade restrictions. In addition to joining NAFTA in 1994, Mexico has implemented domestic programs over the last thirty years with the goal of expanding its agriculture sector. While some of the effects of Mexico’s domestic policies are concurrent with the effects of NAFTA, I separately evaluate the effects of NAFTA and these domestic agriculture policies. Specifically, I analyze the effects of these political developments on Mexico’s agricultural sector by evaluating changes to the trade balances of four major categories of commodities: vegetables, fruits & nuts, dairy and cereals. I compare the changes to Mexico’s trade position with the changes to trade positions of a selected group of six countries, which I call the “comparison countries.” The trade data covers the time period of 1975-2012, enabling the analysis to adequately evaluate the changes to trade “before and after” these political developments intervened. I find that NAFTA had mixed effects on Mexico’s agriculture sector’s development. Some commodities experience growth and increased exports to NAFTA countries, suggesting that NAFTA effected these industries positively. On the other hand, I find that NAFTA marred the development of other commodities as a result of domestic policies in the US distorting trade. Finally, I find that the effects of Mexico’s domestic programs either aided in the growth of some commodities or simply enabled producers to remain in the competitive NAFTA markets