U.S. Exports to Mexico Flourish Under NAFTA

Record growth in U.S. exports to Mexico during the first quarter of 1994 was a bright light in the U.S. Commerce Department’s trade report issued Thursday--and evidence that the North American Free Trade Agreement is living up to its billing.

The easing of tariffs that began when NAFTA took effect Jan. 1 helped boost U.S. exports to Mexico to $11.8 billion in the three months ended March 31--16% higher than the first quarter of 1993. It was the highest quarterly level of exports to Mexico ever recorded, the department said.

“This is very positive,” Lehman Bros. economist Lawrence Krohn said. “The whole purpose of NAFTA was to promote trade and exploitation of comparative advantage, and it looks like it’s happening.”

Sales of U.S.-made electrical machinery, paper, trucks and cereals led the increases. They were among the trade categories on which tariffs were either reduced or eliminated.

Under NAFTA, tariffs on most goods produced and traded within the U.S.-Mexico-Canada trade zone are being phased out over 15 years. But Assistant Secretary of Commerce Charles Meissner said NAFTA is already paying dividends, accounting for “over half of U.S. export growth and one-third of U.S. import growth” so far in 1994.

The growth in U.S. exports to Mexico also demonstrates the strength of the peso, which makes U.S. goods relatively inexpensive compared to domestically produced goods, said David M. Gould, a senior economist with the Federal Reserve Bank in Dallas.

First-quarter imports of Mexican goods and services grew to $11.3 billion, up 22% from the same period in 1993, bolstering proponents’ view that NAFTA is good policy for Mexico as well.