AN EMPIRICAL ANALYSIS OF THE IMPACT OF NAFTA ON ECONOMIC GROWTH OF ITS MEMBER COUNTRIES

Habte G. Woldu
Shawn Alborz
Nitish Myneni
University of Texas at Dallas

ABSTRACT

This study examines whether the creation of North America Free Trade Association
(NAFTA) has had a positive impact on the growth of the national economies of the United States
(U.S.), Mexico and Canada. Based on the data from 1994 to 2016, two models evaluate the
significance of the gross domestic product (GDP) growth of each NAFTA member and estimate
how trade among the member countries impacts their GDP growth. The output indicates that the
GDP growth rates of U.S. and Canada on one hand, and U.S. and Mexico on the other are
supplementary to each other’s economic growth. However, the study does not support the case of
Mexico and Canada. With regard to trade, the U.S. export to Mexico and Canada impacts U.S.
GDP growth positively, while its import from Mexico and Canada was found to be insignificant.
Likewise, the study found that, U.S. export to Canada impacts Canada’s GDP growth rate
positively while Mexican export to Canada impacts Canadian GDP growth negatively. In the case
of Mexico, its export to the U.S. was found to have positive impact on its GDP growth, while its
import from the U.S. and its two-way trade with Canada have no significant impact on its GDP
growth.
Keywords: NAFTA trade deal, U.S., Mexico, Canada, imports, exports, trade openness, GDP growth, economic
growth