Trade Liberalization and Economic Growth in Mexico

Abstract

Let me begin expressing my gratitude to the Seoul National University for their kind invitation to participate in this conference on Trade Liberalization and Economic Growth in Mexico. The theme of the conference, Mexico's international trade and the regional effects of a free trade agreement, is of great importance in our bilateral relations and its timing could not have been a more appropriate one.

As many other latin american countries, and perhaps as a result of our pessimism regarding the behaviour of our terms of trade, Mexico relied on import substitution for more than four decades as a strategy to promote economic development and industrial growth. Trade policy favoured the creation of many medium-sized industries to serve the needs of a small, but growing domestic market. Firms, most of the time, operated with high unit costs and were unable to compete in the world market. Protection granted to the industrial sector expanded those activities which substituted imports at the expense of sectors where the economy had a comparative advantage and therefore with greater potential for the creation of jobs in a labour-abundant country.