NAFTA and the environment: What can the data tell us?

Three channels by which North American Free Trade Agreement (NAFTA) can influence the environmental aspects of the Mexican manufacturing sector are examined through composition, location, and technique effects. Focus is on NAFTA's impact on the composition of US-Mexican trade. Findings that US import intensity did not grow in the dirtier industries relative to cleaner ones at the SIC-4 level between the pre- and post-NAFTA periods are robust to a variety of specifications. There are two caveats to this study. First, the study did not detect specialization at a level less aggregated than the SIC-4 level. Second is the possibility that the explanatory variables in the model do not fully control for NAFTA-related growth in Mexico of industries intensive in unskilled labor. Although the present results are compatible with Levinson and Taylor's (2003) results from a similar period of 1989-96, they stand in contrast with their results for the earlier period of 1977-89, whe US regulatory policies were growing more stringent.