Trade Liberalization in Mexico: An Analysis of the Anti-Export Bias
2 3 Acknowledgements I would like to thank Professor Sven Arndt for his invaluable insights and advice during the creation and completion of this paper. I would also like to thank Professor Heather Antecol for her constant feedback throughout the semester, and everyone else that helped me in constructing this paper. Abstract Modern trade theory suggests that protectionist policies hinder exports by altering domestic prices and production incentives. This paper examines the effect of import tariffs on Mexican non-oil exports through a comprehensive analysis of the Mexican trade sector, including a breakdown of the most important free trade agreements for the Mexican economy, information on Mexican resource mobility and factor endowment, and analysis on Mexico's tariff structure. The paper finds that import tariffs on both intermediate and final goods have a direct and significant effect on exports, alluding to the existence of an anti-export bias, and argues that free trade is the most effective way to promote exports and allow for domestic price readjustment.