Analyzing the Market for Imported Cheese in Mexico

Rapid growth of U.S. dairy exports to Mexico began even before the 1994 North American Free Trade Agreement (NAFTA) and has been fueled by rapid population increases coupled with an expanding Mexican economy. This study uses a nonlinear approximate almost ideal demand system (NLAIDS) to estimate own and cross-price elasticities in the Mexican cheese import market to better understand market behavior and to assess the comparative position of the UnitedStates relative to other cheese market participants. Results of this study imply that attributes of cheese play a strong role in the composition of Mexican cheese import market.     

Nafta,the financial crisis,and multinational management in Mexico

The North American Free Trade Agreement (NAFTA) joined Mexico, the United States, and Canada in a free trade and investment block. While NAFTA has generated considerable interest, much of the initial enthusiasm for the treaty has faded due to the Mexican financial crisis. To learn more about the effects of NAFTA and the crisis on multinational (MNC) strategy and operations, we conducted interviews at manufacturing firms in Mexico. Even with NAFTA, we found that significant restrictions remain that limit the strategies that MNCs can pursue. Also, only a limited number of MNCs have been seriously hurt by the financial crisis due to the risk management strategies these firms have adopted. We conclude with a discussion of the implications of this study for the effective management of MNC firms in Mexico.     

Openness and Industrial Response in a Wal‐Mart World: A Case Study of Mexican Soaps,Detergents and Surfactant Producers

This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal‐Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labour‐shedding and from innovation, which in turn was fuelled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the US detergent market over the past decade, Mexican sales in the US were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re‐tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non‐Latin consumers, and in order to comply with zero phosphate laws in many regions of the US.     

The NAFTA Preference and US‐Mexico Trade: Aggregate‐Level Analysis

This paper focuses on the US tariff preference afforded to Mexico relative to non‐NAFTA trading partners and evaluates the trade effects of NAFTA in a manner consistent with the idea behind a preferential trading agreement. The estimation technique exploits the time‐varying dimension of the tariff preference over 1989 to 2001. This is important because the tariff preference for Mexico into the United States market existed prior to NAFTA. Further, the NAFTA preference was phased in over time. We find that a higher US tariff preference for Mexico corresponds to increased US import demand for Mexican goods, and that a higher Mexican tariff preference for the United States corresponds to increased Mexican demand for US exports. Interestingly, import demand was more responsive to changes in the tariff preference once NAFTA was in place than it was on average.     

North–South trade liberalization and returns to skill in the south: The case of Mexico

This study examines the effect of North American Free Trade Agreement (NAFTA), an instance of North–South trade liberalization, on returns to skill in Mexico. Mexico is abundant in low-skill workers relative to the US and Canada, and so, by the Heckscher–Ohlin–Samuelson trade model, NAFTA ought to have raised the relative earnings of low-skill workers, that is, lowered returns to skill in Mexico. Analysis of Mexican labour micro-data yields the finding that while returns to skill in industries producing tradeables have risen, ceteris paribus, since Mexico embarked upon trade liberalization by joining the GATT in 1986, this rise was less pronounced by 1999 in industries liberalized relatively rapidly by NAFTA, launched in 1994, than in industries liberalized relatively slowly by this phased trade treaty. This is considered evidence of NAFTA holding back rise in returns to skill, since it is plausible such a dampening would have been more marked in industries more rapidly exposed to trade with Mexico's skill abundant northern neighbours. Hence, this study suggests trade with developed nations may lower returns to skill in developing nations.     

Trade and Wages: Two Puzzles from Mexico

Mexico plays an important role in the developing‐country trade‐liberalisation literature because it liberalised early and extensively. Numerous papers analysed changes in Mexican wage levels and inequality after Mexico joined the GATT in 1986. This paper reviews recent papers that analyse changes in wage levels and inequality since the North American Free Trade Agreement in 1994. Two main puzzles emerge. First, wage growth rates are similar before and after NAFTA. Second, Mexican wage inequality, which received much attention after its post‐GATT rise, falls steadily after NAFTA. This paper reviews several possible explanations for these two phenomena.     

Conflict analysis of the NAFTA negotiations

The 1991–92 negotiations for a North American Free Trade Agreement (NAFTA) are modelled at two points in time during the negotiation process from a Mexican perspective. The first model in February 1992 captures the positions of the parties on several key issues. The second model in April 1992 concentrates on the energy issue, which is of particular importance to Mexico. The formal model provided a framework for structuring the negotiation, and a communications medium for discussing and recording it. The analyses were fairly accurate as predictors of events and could have been effective in giving advice to the negotiations.     

Investment and marketing strategies of Mexican companies in the United States: Preliminary evidence

Because of its geographic proximity to the United States and its favored position as a member of the North American Free Trade Agreement (NAFTA), Mexico has become an emerging player in the global marketplace, and this new position has motivated several Mexican companies to establish businesses in the United States. Attempts have been made to explain why Mexican firms have become global players, explanations that focus on several national and international factors. However, these factors omit important drivers of the process, including entry and marketing strategies. This study aims to 1) give an account of how and why Mexican companies enter the United States, and 2) identify some tendencies in the way U.S. subsidiaries of Mexican companies develop and use marketing strategies to serve U.S. markets. © 2004 Wiley Periodicals, Inc.     

The strategic response of multinational enterprises to NAFTA

The North American Free Trade Agreement (NAFTA) incorporates both market liberalizing and market closing measures. For example, the apparel provisions of NAFTA will relieve Mexico of burdensome quotas in the North American market but will impose ultrastrict rules of origin upon the industry. Rugman and Gestrin develop a frame-work that explains paradoxes such as this one by distinguishing between measures that prompt production at the national level versus the regional level. Although their analysis only considers a few significant industries, their framework illuminates the agreement's impact upon virtually any sector of the North American economy.     

Competitiveness in information technology service exports

The US service export base is expanding rapidly as firms seek to penetrate international markets in search of growth opportunities. This article explores mechanisms that a sample of 67 US-based information technology (IT) firms use to export their services to one selected market, Mexico. A correlation analysis revealed that most firms adapt and extend existing IT services for the Mexican market, and consider cultural understanding imperative to successful operations in Mexico. The results also found that firms use a variety of business arrangements (joint ventures, licensing) and a wide array of contract vehicles (time and materials, firm fixed price). © 1995 John Wiley & Sons, Inc.     

Mexico

Not understanding the cultural aspects of doing business overseas can jeopardize the success of international negotiations, entry strategies, joint ventures, technology transfer, marketing, and human resources. This article reports a study of the perceptions of U.S. and Mexican executives concerning the importance of 15 cultural dimensions of doing business in Mexico (our second largest trading partner). It found that, whereas Mexican executives believed more strongly than U.S. executives that the cultural dimensions of doing business in Mexico were more important than the product or service offered and the accompanying terms of sale, the U.S. executives, surprisingly, assigned higher levels of importance to the 15 cultural variables. Both Mexican and U.S. executives strongly agreed on which of the 15 variables were most important. All eight subgroups of U.S. executives assigned higher levels of importance to the 15 cultural aspects of doing business in Mexico than did their Mexican counterparts. When four comparisons of the executives of the eight subsets of U.S. companies‐large vs. small, border location vs. nonborder location, doing business in Mexico vs. not doing business there, and doing business there more than 5 years (pre‐NAFTA) vs. doing business there 5 years or less (post‐NAFTA)—were made of the level of importance they attached to the cultural variables, no significant differences were found. Based on the study's findings, implications for doing business in Mexico are indicated. © 2003 Wiley Periodicals, Inc.     

Estimating the effect of the Internet on international trade

In this article, we study the effect of North American Free Trade Agreement (NAFTA) on the responsiveness of Mexican economy to real exchange rate shocks. We argue that, by opening the US and Canadian markets to Mexican goods, NAFTA made it easier for domestic producers to take advantage of the opportunities brought by the depreciation of the real exchange rate. To identify this mechanism, we use plant-level data and compare the behavior of employment, production and investment after two big real exchange rate shocks: the first observed in the mid-1980s, the second the Tequila Crisis of 1994–1995. The evidence indicates that after passage of NAFTA exporting firms exhibited higher growth rates of employment, sales and investment vis-à-vis non-exporters. We confirm our results by analyzing the behavior of a control group of firms, that had complete access to the US market during both devaluations, and we show that they responded in a similar way in both events. Finally, we also provide direct evidence on the relationship between exports and tariff reductions brought by NAFTA. Our results support the view that NAFTA has allowed Mexican producers to respond more quickly to real exchange shocks.     

A Canadian perspective on NAFTA

Although most analysis of the North American Free Trade Agreement (NAFTA) has focused on the bilateral relationship between Mexico and the United States this article concentrates on the larger trading and investment linkages of Canada and the United States. From a Canadian perspective the NAFTA is an extension of (and improvement upon) the Canada–U.S. Free Trade Agreement (FTA) of 1989. The FTA introduced new dispute settlement mechanisms that Canada views as essential to partially offset U.S. administered protection. The new rules-based system of the FTA is also the basis for the NAFTA, and it has been extended from the trade law regime to cover foreign investment disputes. All three parties in NAFTA will benefit from a rules-based system rather than the power-based system that permits U.S. producer interests to exploit the size asymmetries between the large triad market of the United States and the smaller open trading economies of Mexico and Canada. © 1995 John Wiley & Sons, Inc.     

IMPACT OF THE NORTH AMERICAN FREE TRADE AGREEMENT ON THE U.S. TRADE WITH MEXICO

The North American Free Trade Agreement (NAFTA) took effect on January 1, 1994. The agreement is designed to reduce trade restrictions and enhance trade among Mexico, Canada, and the United States. The primary objective of this article is to examine and estimate the impact of NAFTA on the trade between Mexico and the United States. The data from 1989 to 1998 were used to estimate the overall trade as well as trade in three important products. The trade statistics were divided into two time periods: 1989-1993, before NAFTA, and 1994-1998, after NAFTA. The regression analysis and statistical t-test were employed to determine whether there were significant differences in the dollar volume of trade between the two time periods. The analysis of the data demonstrates that the trade between the United States and Mexico was significantly larger after NAFTA, which could not be attributed to other factors. However, the effects of other factors were analyzed. The success of the NAFTA model may have future policy implications in forging a Free Trade Area of the Americas (FTAA) in the near future.     

Canada's Anti‐dumping and Safeguard Policies: Overt and Subtle Forms of Discrimination

Like many countries in the international trading system, Canada repeatedly faces political pressure from industries seeking protection from import competition. I examine Canadian policymakers’ response to this pressure within the economic environment created by its participation in discriminatory trade agreements such as the North American Free Trade Agreement (NAFTA). In particular, I exploit new sources of data on Canada's use of potentially WTO‐consistent import‐restricting policies such as anti‐dumping, global safeguards and a China‐specific safeguard. I illustrate subtle ways in which Canadian policymakers may be structuring the application of such policies so as to reinforce the discrimination inherent in Canada's external trade policy because of the preferences granted to the United States and Mexico through NAFTA.     

Multinationals and the investment provisions of the nafta

The foreign direct investment (FDI) provisions of the North American Free Trade Agreement (NAFTA) are examined in light of a worldwide trend toward liberalization of the policy environment for multinational firms. We first examine the rationale for entering into international investment negotiations from the perspective of the three signatories—Canada, Mexico, and the United States—and then analyze the accomplishments embodied in the resulting investment provisions. We also briefly address areas where these provisions could be strengthened and that may be on the agenda of future international trade and investment negotiations, whether in other fora or during negotiations involving accession of new member states to the NAFTA.     

Perceived Value of Mexican vs. US Products in Mexico,Venezuela and the United States

Abstract

With the advent of NAFTA and the liberalization of Latin American markets, Mexican firms have gained new strategic options, many of which revolve around exporting regionally or to the United States and Canada. The studies explore consumer reactions to Mexican products. The first study compares value perceptions of a cross-national sample of Mexican, US and Venezuelan respondents toward US and Mexican products. It also explores the moderating effects of product content and financial risk on value differentials. The second study, limited to Mexican and Venezuelan respondents, looks for evidence of a home country bias. While the strategy implications for Mexican products differ according to a product's level of content and financial risk, the studies indicate that inter-regional trade is a viable possibility.     

Building the NAFTA Railway

Abstract

The key but too often overlooked link between firms and communities in the emerging NAFTA economy is transportation. Cross-border investment, trade, competition and cooperation are dependent on the restructuring of the U.S., Mexican and Canadian transport systems into a tightly integrated, efficient network. The paper examines the role of transport industries in the NAFTA economy, focusing particularly on a case study of the strategies of the Kansas City Southern Railway to become the “NAFTA Railway” to compete in the North American economy and the implications of these efforts for the firms involved, government transport policies, and the North American economy.     

U.S. Organizations' Personnel Management in Mexico

Abstract

U.S. organizations are experiencing dramatic growth from the North American Free Trade Agreement. Companies that operate across the Mexican border must decide to either relocate currently employed personnel or to hire foreign nationals to staff positions. Since many cultural differences exist between the United States and Mexico, the use of “culture-pins,” or bicultural people who bridge value differences, may facilitate success in these operations. Consequently, this paper proposes that U.S. firms located in Mexico should recruit and retain Mexican Americans.

RESUMEN

Las corporaciones mexicanas y estadounidenses están creciendo dramáticamente como resultado directo del NAFTA. Las empresas que operan del otro lado de estas fronteras, debe decidir si desean trasladar a sus gerentes y trabajadores o contratar nacionales extranjeros para ocupar estos cargos. Este documento presupone que los iucomodines-culturalesl., o personas biculturales que pueden cruzar el puente de las diferencias culturales, son necesarios para asegurar el éxito de NAFTA y contribuir, brindando una inventaja competitivalc a las compañías participantes. La propuesta de este artículo es que las empresas estadounidenses que operan dentro de México se beneficiarían reclutando y entrenando mexicanos-norteamericanos para aumentar su fuerza de trabajo local.

RESUMO

As empresas mexicanas e americanas têm experimentado um crescimento diretamente relacionado à NAFTA. As empresas, que operam dentro destas fronteiras, devem decidir entre realocar os gerentes atuais contratados ou contratar estrangeiros para ocupar cargos disponíveis. Pretende-se, através deste estudo, mostrar que pessoas com ambas as culturas, capazes de superar as diferenças culturais, são essenciais para o sucesso da NAFTA e contribuem para a vantagem competitiva das empresas envolvidas. Este trabalho prop[otilde]e que as firmas americanas, atuando no México, seriam beneficiadas, se recrutassem e treinassem americanos, de origem mexicana, para aumentar a sua força de trabalho no México.