SAN DIEGO -- A great story in the Washington Post caught my eye recently, and it folds beautifully into a series we here at Fronteras are doing on the impact of the North American Free Trade Agreement.
Turns out, Mexico’s economy is going gangbusters. A growing middle class with a taste for U.S. products and a booming manufacturing sector are increasingly attractive to U.S. businesses and investors. In the midst of the violent and bloody drug war, apparently the Mexican government has made significant investments in infrastructure over the last few years that has allowed trade and manufacturing to grow.
Here are a few statistics that prove it: Mexican exports are now growing at the same rate as China’s, 9.5 percent, according to a very recent report by Barclay’s economist Marco Oviedo.
That’s astonishing, given that from 1997 to 2012 Mexico’s exports grew just 4.5 percent a month, compared with China’s 18 percent over the same period. But the global recession, rising labor costs, and the European debt crisis have slowed China’s growth and, meanwhile, Mexico is on the rise.
Trade between the U.S. and Mexico is another sector where our neighbor to the south is rapidly catching up with China: U.S.-Mexico trade surged 17 percent in 2011 to reach a record $461 billion. That boost in U.S.-Mexican trade is a sixfold increase since NAFTA went into effect in 1994. China’s trade with the U.S. is currently $502 billion, making them currently our number two trading partner behind Canada.
Trade analysts are now singing the praises of “near-shoring” as preferable to “off-shoring” as Mexico becomes more competitive with China and as U.S. manufacturers see the advantage of proximate manufacturing hubs in Mexico. So much trade is going on that one report says there are some six million jobs in this country that depend on trade with Mexico. So much of what is imported from Mexico involves some U.S. parts and labor that any Mexican import purchased in this country can be considered 40 percent “Made in the USA.” Similar imports from China have only a 4 percent U.S. input.
What this all adds up to is a growing excitement for a strong and healthy trade relationship between the U.S. and Mexico. NAFTA laid the groundwork for that and, while there are still problems and inadequacies in the treaty and its enforcement, a strong Mexican economy can only be a boon to this Fronteras region. Check out our series on this topic for more on the pros and cons of free trade with Mexico.