Global Economy Journal

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.

This article confirms that OPEC is neither a cartel nor exhibits any sign of market domination, market control, or monopoly. This confirmation is also in accord with the pioneering account of the competitive differential oil rents formed across the global industry since the crises of the 1970s. The methodology utilized in this study is known as the event-study, an innovative econometric method which attempts to investigate the possible influence of OPEC decisions on output upon the global oil spot and futures prices during the period of 1983-2005. The significance of this investigation is due to the fact that the apparent lumpiness" of OPEC has to have no bearing on a priori acceptance of perfect competition" as opposed to imperfect competition"—a tautological hallmark of neoclassical theory utilized in the bulk of both orthodox and heterodox literature on oil. And, by implication, neither has the neoclassical parlance of rent, as market imperfection" and/or market power," any bearing on the globally competitive differential oil rents earned by the rentier states. OPEC is reflective of the competitive differential oil rents earned by its members; and, contrary to both the right and the left, and their obfuscating echo in the media, it rolls with the heavy-handed punches of global market in the present epoch. This study is rather a posteriori investigation that deals with the reality of competition in the Schumpeterian framework—a reality that, far from the fiction of textbook competition, is neither perfect nor imperfect.

Services have become the engine of growth in a large number of economies in the developing world. Additionally, the rapid development of ICT, and emergence of transnational corporations, has not only made cross-border provision of services easier, but has also increased the demand for and trade in services; developing countries today are increasingly emerging as cost efficient providers of key business and professional services, thereby becoming key players in the services supply chain.

In the absence of explicit tariff barriers, as compared to goods, over the years, countries have more intensively regulated services on grounds of protecting consumer interest and ensuring quality and excellence of professional services provided. It is also true that as cheap labour is the resource with comparative advantage in most developing countries, and especially India, access to developed country markets by means of cross-border supply and movement of natural persons have the potential of conferring the maximum benefits from services liberalisation. However, challenges for market access in developed countries in these two modes of supply lie in the range of regulatory barriers, including burdensome visa formalities, stringent quotas and qualification requirements, and discriminatory taxes, levies and standards faced by the developing country service providers. Most professions are closely regulated and certified, and often self-regulated, usually though sectoral trade associations.

This paper brings out the key elements of the prevalent regulatory measures and barriers to market access for developing country service providers, and assesses how (if at all) the proposed disciplines on domestic regulations would help in securing or easing market access problems of developing country professionals in the developed country markets. An analysis of select professional services in India indicate that for developing countries in general there exist many elements in the proposed disciplines that are not only desirable but would help them to get better market access into key developed country markets. Also it appears that given the prevailing weaknesses of the domestic legal and institutional framework in most developing countries, commensurate changes in the domestic legal and regulatory systems would need to be incorporated prior to the adoption of the DR Disciplines so as to enable countries to fulfill the requirements under such disciplines. Incorporation of suitable S&DT provisions is needed to ensure proper implementation of the said disciplines and satisfy the development agenda of the Doha Round.

In theory, the WTO dispute settlement system is expected, via an elaborate system of sequential legal maneuvers to ensure the implementation of the dispute settlement body (DSB) recommendations. In reality when trade issues rise above some critical threshold to a respondent, the theory behind the DSU enforcement breaks down and the well meaning legal system only leads to prolonging the dispute rather than resolving it. Since 1995, more than 300 complaints have been filed through the WTO dispute settlement system. In most cases, the parties reach a mutually satisfactory solution in accordance with the WTO Agreements through consultations without having recourse to the panel and Appellate Body review. When the consultation process fails the resulting process of Panel reports and Appellate Body reports result in a removal or modification of the violating measures. In those cases where there is no removal or modification of the violating measures, the period of non-compliance tends to be very long and leads to core questions about the true intent of the DSU. In particular, was the DSU designed to ensure a legal process for the settlement of a dispute and to recommend a remedy to the offending violation but was not designed to secure compliance.

The intent of this paper is to show that this is indeed the case. Moreover, if one treats the WTO as a contract, then the non-compliance issue may be viewed as an `efficient breach' and the only efficient remedy is a`fine' rather than the usual practice of suspension of concessions or other obligations to the offending Member. Under our suggested enforcement rules, it may be possible for a Member to continue to breach her obligation to the WTO contract while simultaneously compensating for damages created by the offending measure. The end result will be more efficient than the current system of diplomatic maneuvering designed to pressure the Member to remove or modify the offending measure.

Most industrialized countries subsidize private sector R&D, even under some circumstances when the firm is owned by foreigners. The present paper, using a simple theoretical analysis of a monopoly firm selling only to the U.S. market, argues that such subsidies are welfare enhancing—as long, of course—as the funding agency chooses the projects it funds wisely. The paper suggests that a subsidy rate of 50% might be warranted under some circumstances.

In this paper we use household survey data to study the evolution of income distribution in Mexico over the last decade, a period of rapid integration to the global and North American economies -- "globalization" for short. We measure differences in income inequality, over time and across Mexican states, and relate them to regional differences in the degree of globalization, controlling for the potential endogenous relationship between the two. We use the percent of state employment in exporting firms or in firms with foreign capital participation, as well as data on state trade, as proxies for integration to the world economy. Our findings strongly indicate that globalization has not raised income inequality in Mexico. On the contrary, we present compelling evidence showing that income distribution is more equitable in states that are more closely linked to the world economy and that those states exhibit larger declines in inequality. We also find some statistical evidence suggesting that deepening globalization results in reduced inequality, although our results are sketchier on this point, perhaps because such effect is only observable in the long run. As a potential explanation of why globalization might improve the distribution of income among Mexican households, we show that states that are more integrated to the world economy offer better work opportunities for low-skilled women relative to more educated female workers.