IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/331345.html
   My bibliography  Save this paper

Effects of the EU-Mexico Free Trade Agreement

Author

Listed:
  • Slotmaekers, Veerle
  • de Souza, Lúcio Vinhas

Abstract

The Free Trade Agreement between Mexico and the 15 member countries of the European Union officially entered into force on July 1, 2000. In this empirical study we first use a gravity model for import and export flows to quantify the trade effects of the EU-Mexico FTA. Besides the fixed effects approach we apply the instrumental variables estimator developed by Hausman and Taylor (1981). This method - unlike random effects - does not require independence of unobserved and observed characteristics, and allows us to study variables that are fixed over time. Our results indicate that the EU-Mexico FTA had a positive trade creation effect for imports. Moreover there is no evidence for trade diversion; the FTA generated a positive effect on imports with non-members. Also, other triangular FTAs - a country with which both the US and the EU have signed a FTA - tend to have a negative impact on both imports and exports of the EU and Mexico. We also estimate the effects of the EU-Mexico FTA using a complementary methodology, namely a standard CGE (Computable General Equilibrium) Model, reaching somewhat similar conclusions, albeit here signs of trade diversion are observed for some trade partners, while global welfare does increase.

Suggested Citation

  • Slotmaekers, Veerle & de Souza, Lúcio Vinhas, 2005. "Effects of the EU-Mexico Free Trade Agreement," Conference papers 331345, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331345
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/331345/files/1858.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    2. By Gunnar Jonsson & Arvind Subramanian, 2001. "Dynamic Gains from Trade: Evidence from South Africa," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-8.
    3. T. N. Srinivasan & Jagdish Bhagwati, 2001. "Outward-Orientation and Development: Are Revisionists Right?," Palgrave Macmillan Books, in: Deepak Lal & Richard H. Snape (ed.), Trade, Development and Political Economy, chapter 1, pages 3-26, Palgrave Macmillan.
    4. Berthelemy, Jean-claude & Soderling, Ludvig, 2001. "The Role of Capital Accumulation, Adjustment and Structural Change for Economic Take-Off: Empirical Evidence from African Growth Episodes," World Development, Elsevier, vol. 29(2), pages 323-343, February.
    5. Delano Villanueva, 1994. "Openness, Human Development, and Fiscal Policies: Effects on Economic Growth and Speed of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 1-29, March.
    6. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    7. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," The World Bank Economic Review, World Bank, vol. 11(2), pages 357-382, May.
    8. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
    9. Yair Mundlak, 2001. "Explaining Economic Growth," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1154-1167.
    10. repec:bla:devpol:v:22:y:2004:i:2:p:193-206 is not listed on IDEAS
    11. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    12. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    13. Sherman Robinson & Andrea Cattaneo & Moataz El-Said, 2001. "Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods," Economic Systems Research, Taylor & Francis Journals, vol. 13(1), pages 47-64.
    14. Nehru, Vikram & Dhareshwar, Ashok & DEC, 1994. "New estimates of total factor productivity growth for developing and industrial countries," Policy Research Working Paper Series 1313, The World Bank.
    15. Ravallion, Martin & Datt, Gaurav, 1996. "How Important to India's Poor Is the Sectoral Composition of Economic Growth?," The World Bank Economic Review, World Bank, vol. 10(1), pages 1-25, January.
    16. Shenggen Fan & Peter Hazell & Sukhadeo Thorat, 2000. "Government Spending, Growth and Poverty in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1038-1051.
    17. Arup Mitra & Aristomene Varoudakis & Marie-Ange Véganzonès, 1998. "State Infrastructure and Productive Performance in Indian Manufacturing," OECD Development Centre Working Papers 139, OECD Publishing.
    18. Ravallion, Martin & Datt, Gaurav, 1999. "When is growth pro-poor? Evidence from the diverse experiences of India's states," Policy Research Working Paper Series 2263, The World Bank.
    19. Jimenez, Emmanuel & DEC, 1994. "Human and physical infrastructure : public investment and pricing policies in developing countries," Policy Research Working Paper Series 1281, The World Bank.
    20. Tarp, Finn & Arndt, Channing & Jensen, Henning Tarp & Robinson, Sherman & Heltberg, Rasmus, 2002. "Facing the development challenge in Mozambique: an economywide perspective," Research reports 126, International Food Policy Research Institute (IFPRI).
    21. Sherman Robinson, 1971. "Sources of Growth in Less Developed Countries: A Cross-Section Study," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(3), pages 391-408.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. L. ALAN WINTERS & NEIL McCULLOCH & ANDREW McKAY, 2015. "Trade Liberalization and Poverty: The Evidence So Far," World Scientific Book Chapters, in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 14, pages 271-314, World Scientific Publishing Co. Pte. Ltd..
    2. Wei, Shang-Jin & Wu, Yi, 2001. "Globalization and Inequality: Evidence from within China," CEPR Discussion Papers 3088, C.E.P.R. Discussion Papers.
    3. Winters, L Alan, 2000. "Trade, Trade Policy and Poverty: What Are The Links?," CEPR Discussion Papers 2382, C.E.P.R. Discussion Papers.
    4. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    5. José PINEDA & Lenin BALZA & María CABALLERO & Leonardo ORTEGA, 2008. "Market Diversification and Exports Growth in Latin America," EcoMod2008 23800109, EcoMod.
    6. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    7. Arvind Panagariya, 2003. "Miracles and Debacles: Do Free-trade Skeptics have a Case?," International Trade 0308013, University Library of Munich, Germany.
    8. Ferreira, Francisco H.G. & Leite, Phillippe G. & Ravallion, Martin, 2010. "Poverty reduction without economic growth?: Explaining Brazil's poverty dynamics, 1985-2004," Journal of Development Economics, Elsevier, vol. 93(1), pages 20-36, September.
    9. Francisco Rodríguez, 2006. "Openness and Growth: What Have We Learned?," Wesleyan Economics Working Papers 2006-011, Wesleyan University, Department of Economics.
    10. Lucas Bretschger, 2003. "Growth in a Globalised Economy: The Effects of Capital Taxes and Tax Competition," CER-ETH Economics working paper series 03/24, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    11. Ali, Safdar & Ahmad, Khalil & Ali, Amjad, 2019. "Does Decomposition of GDP Growth Matter for the Poor? Empirical Evidence from Pakistan," MPRA Paper 95666, University Library of Munich, Germany.
    12. Raghbendra Jha, 2002. "Rural Poverty in India: Structure, determinants and suggestions for policy reform," ASARC Working Papers 2002-07, The Australian National University, Australia South Asia Research Centre.
    13. repec:cuf:journl:y:2014:v:15:i:2:calderon:serven is not listed on IDEAS
    14. César Salazar-Espinoza & Sam Jones, 2017. "The impact of infrastructure shocks on agricultural markets: Evidence from the Zambezi river in Mozambique," WIDER Working Paper Series wp-2017-191, World Institute for Development Economic Research (UNU-WIDER).
    15. Navaratnam Ravinthirakumaran, 2014. "Applicability of Openness-led Growth Hypothesis in Sri Lanka," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(2), pages 241-263, September.
    16. Stefania Villa, 2005. "Determinants of growth in Italy. A time series analysis," Quaderni DSEMS 24-2005, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    17. Manfred Wiebelt & Rainer Schweickert & Clemens Breisinger & Marcus Böhme, 2011. "Oil revenues for public investment in Africa: targeting urban or rural areas?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(4), pages 745-770, November.
    18. Federico Bonaglia & Jorge Braga de Macedo & Maurizio Bussolo, 2009. "How Globalisation Improves Governance," Chapters, in: Linda Yueh (ed.), The Law and Economics of Globalisation, chapter 7, Edward Elgar Publishing.
    19. Khan, Rana Ejaz Ali & Sattar, Rashid, 2010. "Trade, Growth and Povety: A Case of Pakistan," MPRA Paper 20904, University Library of Munich, Germany.
    20. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," Research Department Publications 4303, Inter-American Development Bank, Research Department.
    21. Bretschger, Lucas, 2001. "Taking two steps to climb onto the stage: Capital taxes as link between trade and growth," Wirtschaftswissenschaftliche Diskussionspapiere 05/2001, University of Greifswald, Faculty of Law and Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:331345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.