International Trade Outlook for Latin America and the Caribbean: Recovery in an uncertain context

International Trade Outlook for Latin America and the Caribbean • 2017
Chapter I
65
livestock and agroindustrial sectors. The average MFN tariffs applied by Mexico in
these sectors to the countries with which it has no current agreements stand at
8%, 9% and 18%, respectively, whereas it applies much lower duties to the United
States and Canada. The United States accounted for 70%, 73% and 83% of Mexico’s
total imports in those sectors. The analysis focuses specifically on changes in the
Mexican market share of the United States and Latin America and the Caribbean,
under the three scenarios.
In the event that NAFTA is terminated (scenario 2), Mexico’s GDP would fall by
1.9%. The fall would be slightly lower (-1.6%) if a Latin American trade agreement
entered into force at the same time (scenario 3). Under scenario 1, the region
(excluding Mexico) would see GDP growth of 0.3% (see figure I.20). Should NAFTA
be terminated, the best option for Mexico would be to deepen its integration with the
rest of the region and thus cushion the adverse impact of the end of its preferential
treatment with the United States. Meanwhile, a comprehensive regional agreement
would enable the region’s countries, especially in South America, to expand their
trade with Mexico, even in the absence of additional liberalization between Mexico
and those South American countries with which it has not signed wide-ranging
agreements. The positive impact of a Latin American trade agreement on the
region’s GDP would be slightly greater if it were to coincide with the termination
of NAFTA (scenario 3), as a result of the foreseeable shift in the composition of
Mexican imports from United States suppliers to those of other countries in the
region. These simulations do not consider the removal of non-tariff barriers, which
would further increase output and well-being.
Figure I.20
Mexico and Latin America and the Caribbean (excluding Mexico): variations in gross domestic product
in three different scenarios
(Percentage changes from baseline values)
Scenarios that include a regional agreement are more favourable to Mexico
1.0
0.5
0.3
0.3 0.3
0.4
0
0.5
-1.0
-1.5
-2.0
-1.6
-1.9
Regional agreement Termination of NAFTA Regional agreement and
termination of NAFTA
Mexico
Latin America and the Caribbean
(excluding Mexico)
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of General Equilibrium Model simulations using Purdue University, Global Trade
Analysis Project (GTAP 9) database, 2017 [online] https://www.gtap.agecon.purdue.edu/databases/v9/.