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Mexico

 
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Mexico

Foreign Trade

Stabilization and adjustment policies implemented by the Mexican government during the 1980s caused a sharp fall in imports and a corresponding increase in exports. Average real exchange rates rose, domestic demand contracted, and the government provided lucrative export incentives, making exportation the principal path to profitable growth. The 1982 peso devaluation caused Mexico's imports to decline 60 percent in value to US$8.6 billion by the end of 1983. After years of running chronic trade deficits, Mexico achieved a net trade surplus of US$13.8 billion in 1993.

Imports

After 1983 the government eliminated import license requirements, official import prices, and quantitative restrictions. This trade liberalization program sought to make Mexican producers more competitive by giving them access to affordable inputs. By 1985 the share of total imports subject to licensing requirements had fallen from 75 percent to 38 percent. In 1986 Mexico acceded to the General Agreement on Tariffs and Trade (GATT), now the World Trade Organization (WTO), and in 1987 it agreed to a major liberalization of bilateral trade relations with the United States.

As a consequence of trade liberalization, the share of domestic output protected by import licenses fell from 92 percent in June 1985 to 18 percent by the end of 1990. The maximum tariff was lowered from 100 percent in 1985 to 20 percent in 1987, and the weighted average tariff fell from 29 percent in 1985 to 12 percent by the end of 1990. The volume of imports subject to entry permits was reduced from 96 percent of the total in 1982 to 4 percent by 1992. The remaining export controls applied mainly to food products, pharmaceuticals, and petroleum and oil derivatives.

The value of Mexico's imports rose steadily from US$50 billion in 1991 to US$79 billion in 1994 (19 percent of GDP). It rose in response to the recovery of domestic demand (especially for food products); the new peso's new stability; trade liberalization; and growth of the nontraditional export sector, which required significant capital and intermediate inputs (see table 11, Appendix). As a result of the new peso devaluation of December 1994, Mexico's imports in 1995 were US$73 billion, 9 percent lower than the 1994 figure. In 1995 Mexico imported US$5 billion worth of consumer goods (7 percent of total imports), US$9 billion worth of capital goods (12 percent), and US$59 billion worth of intermediate goods (81 percent). Renewed growth and the new peso's real appreciation were expected to increase demand for foreign products during 1996. Imports rose by 12 percent in the first quarter of 1996 to US$20 billion.

The government tried to curb the early 1990s' rise in imports by acting against perceived unfair trade practices by other countries. In early 1993, Mexico retaliated against alleged dumping of United States, Republic of Korea (South Korean), and Chinese goods by imposing compensatory quotas on brass locks, pencils, candles, fiber products, sodium carbonate, and hydrogen peroxide. Antidumping duties were applied to steel products, and all importers were required to produce certification of origin.

But Mexico also was subject to complaints by other countries, which charged that Mexico itself engaged in unfair practices. The European Community (now the European Union--EU) and Japan lodged complaints with the GATT about Mexico's invocation of sanitary standards in late 1992 to limit meat imports.

Data as of June 1996

Mexico - TABLE OF CONTENTS

  • The Economy

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