: Imagine that Canada, the US, and Mexico decide to adopt a fixed exchange rate system. What would be the likely consequences of such a system for the flow of trade and investment between all three countries

The exchange rate would benefit the U.S. and Canada more, that it would benefit Mexico.

This is because the Mexican currency: Mexican Peso, is devalued when compared to the U.S. Dollar and the Canadian Dollar. This means that Mexican exports are comparatively cheaper than American or Canadian exports, causing a great growth of Mexican manufacturing in recent decades.

In a fixed exchange rate system, Mexico would lose this competitive advantage. It would still have lower labor costs, but the amount of manufacturing that would move from the U.S. and Canada to Mexico would probably be less.

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