Date of Conferral
Information Systems and Technology
Dr. Judie Forbes
The enactment of the North America Free Trade Agreement (NAFTA) was intended to reduce tariffs on most goods by 2008 among Canada, the United States, and Mexico, and to create the largest regional market outside the European Union. Early research conducted to investigate the relationships between tariffs elimination and trade volume focused mainly on macrolevel effects with mixed results, without acknowledging the possible influence from exchange rate fluctuations. After 20 years, NAFTA has provided the opportunity to observe a significant reduction in tariffs between 1994 and 2013. Skepticism regarding the relationship between trade liberalization and the regional economy, and the controversy still surrounding NAFTA, suggests that other factors might influence trade, making the current study relevant. The purpose of this study was to investigate possible relationships between exchange rate fluctuations and trade volume during a period when tariffs were eliminated. This study focused on 2 basic theories of preferential trade and the exchange rate, and data were collected on imports-exports between Mexico and the United States. Regression analyses showed a relationship between exchange rate fluctuation and trade volume when tariffs are eliminated. The findings may help exporters and unions understand the implications of other factors affecting trade. The findings may also help union leaders understand how other economic factors may have implication on global economy rather than focusing solely on trade agreements, and to better strategize in addressing social issues of concern related to globalization.