KRWG

The Vital Trade Connection Between The United States And Mexico

Jul 15, 2019

Commentary: From 1991 to 1994, I worked in Mexico City as the Director of New Mexico’s Mexico commercial/tourism office. This was the period when the North American Free Trade Agreement (NAFTA) was negotiated and formally enacted by all three countries on January 1, 1994. American ex-patriots such as myself formed an ad hoc group to lobby the Mexican government and U.S. policymakers in favor of passing NAFTA. I remember being at the U.S. Embassy in Mexico City, with other compatriots, eating snacks and drinking beer while watching the U.S. House of Representatives debate and then vote in favor of the agreement. It was an exciting time to be involved in the international trade arena, and I was grateful to witness first-hand the creation of NAFTA.

Twenty-five years later, as Yogi Berra would say, “It’s déjà vu all over again.” On June 26, Dr. Luz Maria de la Mora Sanchez, Mexico’s Undersecretary for Foreign Trade, visited the El Paso/Juarez region to speak about North American trade and the importance of the U.S. passing the revised NAFTA agreement that is being called the United States-Mexico-Canada Agreement (USMCA). I had the opportunity to meet with de la Mora Sanchez and discuss opportunities to improve trade between the U.S. and Mexico. As with most Mexican diplomats I have ever dealt with, de la Mora Sanchez is extremely educated (PhD from Yale), polished, and very charming.    

She spoke of Mexico’s challenge to close the economic gap between Mexico’s poorer southern states and the more affluent ones in the north. She also discussed how the Andres Manuel Lopez Obrador (AMLO) Administration has spearheaded the passage of labor reforms in Mexico, which although a 180-degree change in direction, will take time to see effects. She stressed that AMLO had raised the minimum wage along the border by 100 percent, and this had not affected inflation, as some people worried it would.

As per the new USMCA, de la Mora Sanchez was a very effective lobbyist for its ratification by the U.S. Congress. She referred to NAFTA as being “transformational” for Mexico, and a tool used her country to improve its economic development. At present, 78 percent of Mexico’s economy is based on foreign trade, as opposed to 64 percent in Canada, and 28 percent in the U.S. Today, Mexico is the eighth-largest exporter and ninth-largest importer in the world. More than $540 billion in foreign direct investment has been injected into Mexico since 1999, one of the largest totals for an emerging economy. At present, Mexico has 13 free trade agreements with 50 different countries.

De la Mora Sanchez advocated that Mexico and the U.S. are part of one production platform, and that NAFTA has helped integrate the economies. Trade between the U.S. and Mexico is seven times larger than it was before NAFTA. The U.S. exports more than $265 billion to Mexico. Our southern neighbor has become the third-largest trading partner for the U.S. during the NAFTA period, buying 16 percent of the U.S.’s total world exports. More than $1.7 billion of trade is generated between the U.S. and Mexico daily. Note that for the first six months of 2019, Mexico was the biggest trading partner of the U.S., due to the current U.S.-China trade war.

Approximately 40 percent of the content of Mexican products exported to the U.S. are of U.S. origin (i.e. U.S. plastic, steel, and electronic components). Based on this, de la Mora made an interesting point when she said, “When Mexico exports, the U.S. also exports.” Mexico is the second-largest buyer of U.S. agricultural products and the largest supplier of these products to the U.S. Exports to Mexico account for 38 percent of New Mexico’s international trade, and 34.2 percent of those of Texas -- the highest percentage of any U.S. states.

Mexico’s congress passed the new USMCA on June 19. De la Mora Sanchez stated that Mexico understands the concerns by many U.S. policymakers as to whether the agreement adequately protects labor rights. She emphasized that labor and anti-corruption elements are parts of the USMCA, and these will help both countries create a stronger trade foundation. However, Mexico does not want to reopen negotiations on the USMCA: rather it wants to explain how it is going to address these issues going forward.

De la Mora concluded our meeting by emphasizing how the U.S. and Mexico are good neighbors and important to each other’s economies. She did point out that unilateral issues (I interpreted this as referring to the Trump Administration’s most recent threat of tariffs against Mexico) are not helpful, and that “There are always issues that friends have, but unilateral actions are a self-inflicted wound on both countries.” She strongly feels that the U.S. and Mexico can work together to create effective solutions to solve our problems. This is what good partners do. With these concluding thoughts from de la Mora, I was transferred back to 1994. 

Jerry Pacheco is Executive Director of the International Business Accelerator, a non-profit trade counseling program of the New Mexico Small Business Development Centers Network, and the President/CEO of the Border Industrial Association.  He can be reached at 575-589-2200 or jerry@nmiba.com