Global Managerial Economic Essay Example | Topics and Well Written Essays - 750 words

Global Managerial Economic - Essay Example As a result of the supplemental agreements signed in 1993, NAFTA highlights the protection of environment and human resources recognizing that the entry of companies into the nations’ territories endangers them (NAFTA 1-5). The twelve year institution of NAFTA has changed the economic landscape of Mexico. Trade barriers have been significantly reduced in order to facilitate the entry of goods and services within the country’s borders. It can be recalled that prior to NAFTA, Mexico’s tariff reaches an average of 10%. This high level is reduced to the prevailing 2.9%. Empirical data also shows the significant improvement in the flow of goods between US and Mexico. In dollar terms, exports of goods to Mexico prior to NAFTA tripled in the third quarter of 2000. US imports from Mexico also tripled from 1994-2003. Exports now constitute a huge portion of the country’s GDP (The Effects of NAFTA on US-Mexican Trade and GDP 3). Trade liberalization has benefited the Mexican customer by providing more choices in the market. The reduction in tariff and other trade barriers consequently lower the prices of commodities. It should also be noted that the free flow of goods and services between the NAFTA participants significantly improved Mexico’s balance of payments. More jobs have also opened in order to support the larger export requirements. The NAFTA also facilitates the inflow of foreign direct investment from the United States and Canada. Recognizing that business organizations can take advantage of the lower input and labor costs, manufacturers are now locating their plants in Mexico. FDI inflow in Mexico after NAFTA has substantially mounted. In fact, the year 1996 brought $800 million private foreign direct investment which represents almost two times the country’s GDP (Study on the Operation 1). However, the proliferation of foreign firms operating in Mexico has brought about