Economics and Trade
Mexico’s gross domestic product (GDP) was an estimated $1.1 trillion in 2011, about 7% of U.S.GDP of $15.0 trillion. Per capita income in Mexico is significantly lower than in the United States. In 2011, Mexico’s per capita GDP in purchasing power parity was $17,040, or 64% lower than U.S. per capita GDP of $47,190 (see Table ?). Ten years earlier, in 2001, Mexico’s per capita GDP in purchasing power parity was $10,653, or 70% lower than the U.S. amount of $36,082. Although there is a notable income disparity with the United States, Mexico’s per capita GDP is relatively high by global standards and falls within the World Bank’s upper-middle income category. Mexico’s economy relies heavily on the United States as an export market. Exports accounted for 32% of Mexico’s GDP in 2011 and over 80% of Mexico’s exports are headed to the United States. (Villarreal 2012)

Up until the 1980’s Mexico followed strict protectionist policies to protect their domestic industries from being overwhelmed by unfair competition of other countries. As expected, the protectionist policies worked in the short run but after decades of this policy Mexico suffered a tremendous economic collapse. Many of the industries that Mexico was trying to protect became less competitive in the marketplace. This collapse started the framework for the North American Free Trade Agreement (NAFTA) that ultimately went into effect in 1994.
Gauging the effect that NAFTA had on the U.S economy is difficult. Positively or negatively Mexico’s trade with the United States is only 2% of U.S GDP. Thus, changes to trade agreements with Mexico would not significantly affect the U.S economy as a whole.
Economists will debate the effect that NAFTA had on the Mexican economy. Some will argue that NAFTA benefited Mexico while others claim that NAFTA had a very small effect if any. What