Mexican Unilateral Trade Liberalisation in the Middle of the Economic Crisis
At the end of 2008, Mexico announced an ambitious unilateral effort to reduce MFN tariffs. GTA Analytical Paper No.2 will discuss the motivations behind such a policy, describe the scope of the trade liberalisation programme, and provide some preliminary estimates of its impact on Mexican imports. After the introduction,the paper is divided into three main sections. The first explains the logic of the implementation of a tariff dismantling by a developing economy such as Mexico.
The main objectives pursued by the Mexican authorities are described, such as the increase in Mexican export performance, FDI attraction and in general terms, the promotion of Mexican economic competitiveness of the Mexican economy of high import tariffs with non-preferential trade partners. The second section describes the level of ambition of the tariff dismantling, the type of products included and the phase-out schedule established. The relevance of implementing this measure in the middle of the economic crisis is examined. The final section of the paper reviews the impact, in its first year, of the tariff reduction. Using recent Mexican import data that includes all of 2009, disaggregated by tariff line, country of origin, and import regime (preferential and non-preferential imports), we compare non-preferential imports with preferential imports, either in levels or as shares of all imports. Appropriate control variables (eg consumer vs capital good dummies) take into consideration demand shocks that may affect tariff lines differently. With this approach, estimates of the impact of the duty elimination on non-preferential imports, for example how much nonpreferential trade increases for every percentage point in tariff elimination, are obtained.
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