Mexico's Path Towards the Free Trade Agreement with the U.S.

University of Miami Law School Institutional Repository University of Miami Inter-American Law Review 10-1-1991 Mexico's Path Towards the Free Trade Agreement with the U.S. Rudy Sandoval Follow this and additional works at: http://repository.law.miami.edu/umialr Part of the International Trade Commons Recommended Citation Rudy Sandoval, Mexico's Path Towards the Free Trade Agreement with the U.S., 23 U. Miami Inter-Am. L. Rev. 133 (1991) Available at: http://repository.law.miami.edu/umialr/vol23/iss1/5 This Article is brought to you for free and open access by Institutional Repository. It has been accepted for inclusion in University of Miami InterAmerican Law Review by an authorized administrator of Institutional Repository. For more information, please contact . 133 MEXICO'S PATH TOWARDS THE FREE TRADE AGREEMENT WITH THE U.S. RUDY SANDOVAL* I. II. INTRODUCTION ....................................................... 133 MEXICO'S PAST TRADE PRIORITIES ...................................... 134 III. PRIOR MEX c AN TRADE ............................................... 136 MEXICO'S CONSTITUTIONAL FOREIGN TRADE LAWS ........................ 137 MEXICO'S ACCESSION TO GATT ........................................ 138 THE 1987 UNDERSTANDING ON TRADE AND ................... 143 VII. TRADE POLICY LEADING TOWARDS THE 1989 INVESTMENT REGULATIONS ..... 145 IV. V. VI. VIII. INVESTMENT THE 1989 FOREIGN INVESTMENT REGULATIONS ........................... IX. RECENT "FAST-TRACK" Aut orrH ..................................... X. 150 152 A. The Fast-Track Process ......................................... 155 B. Fast-Track Objections and Hurdles ............................... 156 CONCLUSION ............................................................ I. 158 INTRODUCTION The proposed Free Trade Agreement' between Mexico and the * B.B.A., Texas A & I University; M.A. in Economics, Notre Dame University; J.D., Thurgood Marshall School of Law; LL.M., Harvard Law School; former law professor, University of San Diego School of Law and the Notre Dame Law School; professor of international business law and economics, University of Texas at San Antonio. 1. Presidents Bush and Salinas agreed on June 10, 1990, to begin comprehensive preparations which will eventually lead to the negotiation of a U.S.-Mexico Free Trade Agreement (FTA). They defined an FTA as follows: a process of gradual and comprehensive elimination of trade barriers between the United States and Mexico, including: (1) the fullphased elimination of import tariffs; (2) the elimination or fullest possible reduction of nontariff trade barriers, such as import quotas, licenses, and technical barriers to trade; (3) the establishment of clear, binding protection for intellectual property rights; (4) fair and expeditious dispute settlement procedures; and (5) other means to improve and expand the flow of goods, services, and investment between the United States and Mexico. See Kal Wagen- INTER-AMERICAN LAW REVIEW [Vol. 23:1 United States presents complex issues in both national and international settings. Any examination of these issues requires a comprehensive understanding of the recent trade policies which have been promulgated by the Government of Mexico. These policies have radically altered the environment for international trade within Mexico and will shape the formation of any free trade agreement between the two countries. Hence, a proper analysis of the Free Trade Agreement must have, at its heart, a grasp of the precedents that will serve as a framework for a free trade agreement. Among the various developments in Mexico's' trade policy which will be surveyed to gain this deeper understanding will be: Mexico's Foreign Trade Law,2 Mexico's accession to the General Agreement on Tariffs and Trade (GATT),' U.S.-Mexico Framework Agreement, 4 the new regulations governing foreign investment in Mexico, 5 as well as the recent "fast-track" authority that Congress gave to President Bush.' This Article will briefly outline these policy changes and discuss their impact on a possible Free Trade Agreement. Preceding this discussion, a quick look at the history of Mexican trade policy, and specifically Mexican-U.S. trade, is included in order to fully understand the dramatic evolution of Mexican trade policy. II. MEXICO'S PAST TRADE PRIORITIES During most of the twentieth century the Government of Mexico has pursued a policy of import substitution, which strongly restricted foreign goods from being imported and, consequently, limited the access of Mexican exports to foreign markets.7 Aimed at protecting vulnerable Mexican industries from foreign competition, these policies included various forms of tariffs, subsidies, import licenses, quotas, and local content restrictions.8 These political deheim, Mexico-U.S. Free Trade Agreement Is Moving Closer to Reality, WALL ST. J., Oct. 1, 1990, at B7; see also The Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, 102 Stat. 1107 (1988) (codified in scattered sections of 19 U.S.C.). 2. See infra notes 26-36 and accompanying text. 3. See infra notes 37-65 and accompanying text. 4. See infra notes 65-79 and accompanying text. 5. See infra notes 80-109 and accompanying text. 6. See infra notes 110-147. 7. Guy C. Smith, The United States-Mexico Framework Agreement: Implications for Bilateral Trade, 20 LAW & POL'Y INT'L Bus. 655, 661 (1989). See also Ernesto Rubio del Cueto, CountervailingDuties Affecting United States-Mexican Trade, 12 Hous. J. INT'L L. 323, 333-334 (1990). 8. See del Cueto, supra note 7, at 325. 1991] U.S.-MEXICO FTA cisions, which valued rapid industrialization over the potential benefits of foreign trade and competition, did in fact achieve their goal of contributing to the development of a Mexican manufacturing base. 9 Throughout most of the post-World War II period, Mexico's considerable array of import controls made it one of the most protectionist nations in Latin America.10 Understandably, Mexico's historical resistance to international trade had also been linked to its desire to avoid direct and substantial U.S. influence over its economy." While the protectionist policies of the Mexican Government achieved their initial objective of establishing a manufacturing base, these policies were not without their shortfalls.12 Protected from foreign competition, many Mexican industries lacked the incentive to modernize and thus were unable to challenge the industrial prowess of the developed (and many of the developing) nations."3 Completely dependent upon domestic demand, Mexican industry eventually faltered as the country continued to pursue its protectionist policies. Eventually, the tremendous decline in world14 oil prices in the early 1980s and Mexico's spiraling foreign debt, prompted the Government to abandon its protectionist policies and to examine avenues to usher in foreign trade. 15 Guided by the belief (...truncated)