G.O.A.T. of the week – MEXICO OVERTAKES CHINA AS THE LEADING SOURCE OF GOODS IMPORTED TO THE U.S. (PBS)

 

(Mexican and American Flags : Image Source : Atlantic Council)

This was a surprising read! As per the article, this is the “first time in two decades (since 2002)” (“Mexico Overtakes China as the Leading Source of Goods Imported to U.S.”) that Mexico has been able to achieve this significant accomplishment. There are a variety of political positives that will result from this achievement including strengthened trade relations via NAFTA, job creation and economic growth for both the United States and Mexico, leverage with immigration policies, geopolitical diversification, friendlier relations, and easing supply chain chokeholds that became prevalent during the pandemic. 

“The establishment of free trade agreements can be a critical and progressive step towards greater economic integration and continues to become more valuable in an increasingly global world.” - Dan Kildee 

Because of the resulting issues involving coronavirus, the United States became more dependent on the fostered business relationships of our closer in proximity Mexican neighbor. When the entire world virtually shut down during the pandemic, supply chain issues created a chokehold of maritime traffic jams in the Pacific Ocean which made Chinese exported goods take doubly longer to reach their destinations. The need was dire and with every country demanding these commodities and products, there was only so much to go around. Even before the pandemic, relations with China had been strained due to the high tariffs that were imposed during Donald Trump’s presidency. His reasoning behind this was because “China was buying fewer US goods and stealing American business’ intellectual property” (Partington) so there needed to be a heavy-handed reprimand to address these things. 

(Trade War between America and China : Image Source : More Than Shipping)

Correspondingly, American businesses started limiting their offshoring practices and instead began the process of “near shoring.” Offshoring entails moving parts of their businesses overseas to take advantage of lowered cost advantages while nearshoring involves “outsourcing business processes to a nearby location, thereby reaping the benefits of reduced costs while strengthening cultural alignment” (Drenik). Because of the proximity in utilizing Mexican produced goods, the time it takes to receive such products has drastically been reduced. When the United States orders goods from China, “It takes one month to arrive instead of the two weeks it takes to receive those same goods from Mexico” (Goodman).  

(Desired Profit Growth : Image Source : Financial Adviser)

According to the Observatory of Economic Complexity report, the top three most imported goods to the United States were “computer parts, cars and their likewise motor vehicle accessories, and refined petroleum” (“United States (USA) and Mexico (MEX) Trade | the Observatory of Economic Complexity”). Because of nearshoring, it is estimated by the Economic Research and Teaching Center that “150,000 jobs were created in Mexico” (“Article”) while the Mexico Institute emphasizes should the United States end their NAFTA trade alliance, “4.9 million United States citizens would be out of work” (“Growing Together: Economic Ties Between the United States and Mexico”). It is also important to highlight that because of the NAFTA (North American Free Trade Agreement) arrangement, it eliminates tariffs on most goods imported from Mexico, thereby creating economic profit, sustained job growth, and both strengthened and friendlier relations between the two countries.  

(Round Table of Global Cooperation : Image Source : World Economic Forum)

Allowing another country a seat at our table creates diversification opportunities instead of relying on unsuitable trade arrangements between a country that routinely employs cyber espionage to steal foreign business’ intellectual property rights (Woollacott). It also helps to ease our reliance on Chinese manufactured goods while we navigate the geopolitical tensions concerning Taiwanese sovereignty, which will no doubt explode at some point in the near future.  

“The best public policy is made when you are listening to people who are going to be impacted.” - Elizabeth Dole 

As a final note, this type of free trade arrangement where both countries benefit equally will allow Mexico to leverage their success with harsh and stringent immigration policies proposed by the GOP congress people. It will encourage more structured and reasonable conversations surrounding the controversial policies that Republican hopefuls want to utilize in demonizing the Mexican people. Relying more on Mexico instead of China will help to foster a renewed cooperation where we do not want to alienate them in the future. It can only be viewed as a positive for renewed exchanges of dialogue surrounding our past failures in foreign policy with Mexico. Hopefully with time, this success story will continue its trajectory and with the creation of more jobs and opportunity, less people will want to flee, more people will feel safe and happy in staying and it will lessen the chokehold at our Southern borders. We must invest in this future together for everyone to come out as a winner! 

Sources:  

“Article.” Mexico Business, 27 Mar. 2023, mexicobusiness.news/talent/news/nearshoring-mexicos-moment-jobs-and-upskilling. 

Drenik, Gary. “Why Nearshoring Is Closer Than Ever: How Mexico Is Becoming the Next Big Thing in Global Markets.” Forbes, 20 Feb. 2024, www.forbes.com/sites/garydrenik/2023/03/23/why-nearshoring-is-closer-than-ever-how-mexico-is-becoming-the-next-big-thing-in-global-markets/?sh=7951bacf354b. 

Elizabeth Dole Quote: “The Best Public Policy Is Made When You Are Listening to People Who Are Going to Be Impacted.” quotefancy.com/quote/1600239/Elizabeth-Dole-The-best-public-policy-is-made-when-you-are-listening-to-people-who-are. 

Goodman, Peter S. “‘OK, Mexico, Save Me’: After China, This Is Where Globalization May Lead.” The New York Times, 8 Aug. 2023, www.nytimes.com/2023/01/01/business/mexico-china-us-trade.html. 

“Growing Together: Economic Ties Between the United States and Mexico.” Wilson Center, www.wilsoncenter.org/article/growing-together-economic-ties-between-the-united-states-and-mexico#:~:text=Theodore%20Moran%20and%20Lindsay%20Oldenski%20have%20analyzed%20U.S.-Mexico,increase%20in%20U.S.%20research%20and%20development%20spending.%20. 

“Mexico Overtakes China as the Leading Source of Goods Imported to U.S.” PBS NewsHour, 7 Feb. 2024, www.pbs.org/newshour/economy/mexico-overtakes-china-as-the-leading-source-of-goods-imported-to-u-s. 

Partington, Richard. “Why Is Trump Imposing Tariffs on China and How Could It Affect Global Economy?” The Guardian, 2 Aug. 2019, www.theguardian.com/business/2019/aug/02/why-is-trump-imposing-tariffs-on-china-and-how-could-it-affect-global-economy. 

“TOP 25 TRADE AGREEMENTS QUOTES (of 73) | A-Z Quotes.” A-Z Quotes, www.azquotes.com/quotes/topics/trade-agreements.html. 

“United States (USA) and Mexico (MEX) Trade | the Observatory of Economic Complexity.” The Observatory of Economic Complexity, oec.world/en/profile/bilateral-country/usa/partner/mex. 

Woollacott, Emma. “Chinese Cyber Espionage Set to Ramp up This Year.” Forbes, 29 Feb. 2024, www.forbes.com/sites/emmawoollacott/2024/02/28/chinese-cyber-espionage-set-to-ramp-up-this-year/?sh=535beedb768f. 

 

Image Sources: 

Ahadap. “It’S Time to Refresh the Caribbean Energy Security Initiative.” Atlantic Council, 26 July 2023, www.atlanticcouncil.org/blogs/energysource/its-time-to-refresh-the-caribbean-energy-security-initiative. 

Ong, Henry. “Maximizing Your Profit Potential.” Financial Adviser, 4 June 2021, financialadviser.ph/maximizing-your-profit-potential. 

“We Need Multilateral Cooperation and a Reset to Recover Better.” World Economic Forum, 20 May 2022, www.weforum.org/agenda/2020/07/multilateral-cooperation-reset-recover-better. 

Yang, Peter. “What Are Trade Wars? - More Than Shipping - Top Shipping Blog.” More Than Shipping, 13 Sept. 2018, www.morethanshipping.com/what-are-trade-wars.