This is an insightful, thorough, well-supported essay on an understudied topic: the impact of trade and investment liberalization on income distribution, growth, and equity in developing countries. Mehrene Larudee cuts through much of the ideology and textbook stereotypes to discuss the case of Mexico under NAFTA. Larudee succeeds in conveying the complexity of the real world events that motivate and accompany economic integration.

The issue of how developing countries fare under trade and investment liberalization is crucial to the political debates currently taking place around trade agreements with Africa and Latin America, as well as the terms of IMF funding. Conventional wisdom holds that trade liberalization provides unmitigated benefits for developing countries, while critics have argued that the rules contained in trade agreements make a difference to the outcomes, especially with respect to distributional effects.

Larudee argues that standard economic theory and the predictions of many NAFTA supporters overstated the likely benefits of NAFTA to Mexico. She provides an excellent analysis of the actual and expected gains from trade and investment liberalization for Mexico, and this chapter will be both absorbing and useful reading for people involved in the NAFTA debate on either side. However, Larudee's analysis of NAFTA's impact occasionally tends to treat liberalization as a yes-or-no choice, rather than a how-to.

The paper reviews six benefits typically claimed to accrue to developing countries as a result of trade and investment liberalization with a more developed country.