A Review of "NAFTA and Productivity Convergence Between Mexico and the US"

This paper offers a review of an article titled “NAFTA and productivity convergence between Mexico and the US” by Tadashi Ito. It was published by the Spanish economics journal Cuadernos de economía  in 2010. The article makes an evaluation of whether The North American Free Trade Agreement (NAFTA) made a meaningful contribution of productivity convergence between the United States and Mexico. Ito begins the article by indicating that the establishment of free trade agreements (FTAs) poses as a most important trend of globalization, as witnessed in the past few decades, which usually involves agreements between states in the North and those on the South. He makes a factual point by indicating that the agreements of liberalization (the established and the negotiated) are usually between the developing and the developed nations. Overall, the article holds that NAFTA resulted in an increase in FDI inflow and exports of Mexico owing to the liberalization of trade, implying an enhanced position of competitiveness and productivity in general. 

The article discusses econometric methods that serve to enhance mechanisms of generation of total factor productivity (TFP) with regards to the FTA. It, however, indicates that there is an increasing TFP gap level in the situation of the United States and Mexico even though there is some level of the desired outcome reported. Clearly, Ito goes to great lengths to offer evidence-based information on the platforms of research and literature review. The resultant effect is that the article draws interest by documenting the increasing gap of TFP, which has not been noticeably achieved by many earlier literary pieces on the subject. In some ways, the strong position of the article serves to weaken the claims of earlier studies. A keen analysis of the information shows that it offers foundations for improvement as well as counter-evidence to some earlier pieces of literature on the subject matter of the positive impact of NAFTA on aspects of technology convergence. Still, the article does note refutes the ideology that FTAs facilitate an apparent sense of convergence of technology. In fact, it is therein indicated that the FTAs are usually expected to nurture the convergence of technology between the developed and the developing world. 

I also agree with Ito in the findings that imply a lack of evidence of any substantial effects of NAFTA. Indeed, basing the study on analysis of total factor productivity as a measure of technology convergence poses a reliable means of study. The article also offers a very agreeable point of indicating that NAFTA offers a good starting point of investigating if the FTAs between the developed and the developing countries established good bases for productivity convergence and technology transfers and spillovers. Accurately, the FTA is the first major one that is between a developed country and a developing country. Ito infers that the agreements serve the purpose. Indeed, and by looking at the evidence-based information, the FDI inflows and imports in Mexico increased rapidly soon after the establishment of NAFTA in 1994. Large portions of the FDI inflows and imports were also from the United States. 

I am confident that there are hardly any points in the article that I disagree with thus far. Nonetheless, and to better improve the article, Ito would better have incorporated reports of TPF, as a measure of technology, across more industries for purposes of determining whether the increase in the gap was influenced by factors that are industry specific. Still, the way that the article analyses the productivity determinants associated with the FTA is meticulous and accurate. Ito ensures to employ ranges of dynamic panels in a manner that offers results of great interest. Even so, and to some level, the findings are seemingly not enough to make them capable to be elements of the formation of trade policies. Such is the case because of the nature of heterogeneity of the two countries. As such, there is a need for more in-depth analysis of the two countries individually with aims of determination of policy recommendations. Special consideration needs to be placed on the shifting nature of the political environment of the United States since the election of Donald Trump as the president.