Economic Effects of NAFTA on Mexico

The economic effects of NAFTA on Mexico have been discussed and measured mostly in terms of its effect on employment on both sides of the border and by the increase in Mexico-US trade and investments before and after NAFTA. These are the wrong ways to measure the effects of a free trade area on a member state. In this paper, I will first discuss the theoretically correct method of evaluating the economic effects of the formation of a free trade area in general and then apply this method to correctly measure the effects of NAFTA on Mexico.