How Mexican Manufacturing Benefits the US
Particularly in political rhetoric, Mexico and the US are sometimes painted as economic competitors, with the loss on the part of one reflecting a gain on the part of the other. However, since the passing of NAFTA in the 1990s, the economies of Mexico and the US have grown increasingly interdependent, and the Latin American country is now a significant benefactor for the US.
In an increasingly global marketplace, the unique relationship between the two North American countries has proven to be invaluable in competing. Indeed, the two countries now experience the same recession-growth cycle together. The US has a vast consumer market and knowledge base that empower Mexico, and Mexican manufacturing benefits the US in many overlooked ways. Together the two countries comprise a formidable competitor on the world market, with a combined total of over 50 free trade agreements with major economies in both Asian and Europe.
By the Numbers: Mexican Manufacturing Benefits:
- According to the Brookings Institute, the total value of goods and services sold to Mexico annually is estimated at $2.3 trillion USD.
- US jobs supported by this supplier relationship with Mexican manufacturing number over 11 million.
- Trade between the two countries is valued at approximately $1 billion USD per day.
- Approximately half of all US states enjoy approximately $1 billion USD in sales to Mexico per state.
- A more open oil market in North America reduces oil prices for the region.
In at least one industry – the auto industry – Mexican manufacturing benefits the
- US significantly by creating demand for US inputs and labor at nearly every step of the manufacturing process. This high level of vertical specialization is reflected by the fact that automobiles manufactured in Mexico typically cross the border eight times during the manufacturing process.
- When the US buys goods manufactured in Mexico, 40 cents of every dollar goes back to US labor responsible for producing inputs used in those goods.
Mexico purchases more imports from the US than are purchased by all BRIC countries combined.
- Due in part to Mexico’s significant growth, regional trade overall increased from $290 billion USD at the signing of NAFTA in 1994 to present levels of $1.1 trillion USD.
Regardless of scaremongering heard from time to time on the political front, the numbers portray a vibrant partnership mutually ensuring a healthy economic future for the two North American economies. With every milestone of growth, Mexican manufacturing benefits the US more and more.
As regulatory and tax burdens increase in the US and companies engaged in international commerce face lower cost competitors we will continue to see movement of some companies to Mexico. The complexities of such a move create fear and concern for executives who are putting their jobs on the line when even contemplating such a move. For these reasons only a comparatively small segment of US manufacturers will make the decision to have some their operations in Mexico. For those companies the Tecma Group of Companies provides a Shelter Service that makes such a move no more complicated than moving from one side of town to the other.