Economy and Trade

U.S.-Mexican Competitiveness

by Editors

The increasingly important economic relationship between the United States and Mexico consists of both formal agreements, such as NAFTA, and an interdependency for trade and production opportunities.  

 

Mexico Economic Cooperation for a Competitive Region.  A discussion organized by the Mexico Institute of the Woodrow Wilson Center (WWC)

This highly informative panel discussion held at the WWC’s Mexico Institute includes Mexico’s Secretary of Economy, Ildefonso Guajardo, executive vice president of WWC, Andrew Selee, and director of the WWC Mexico Institute, Duncan Wood.  The participants discuss numerous topics related to bilateral economic cooperation including the purpose of the U.S.-Mexico High-Level Economic Dialogue (HLED), business clusters along the border, and the effects of free-trade agreements such as NAFTA and the TPP on current and future economic cooperation.

El Instituto México del Wilson Center (WWC) organizó una discusión sobre la cooperación económica entre los E.E.U.U. y México, abordando temas como el propósito del Diálogo Económico de Alto Nivel México-Estados Unidos , oportunidades de negocios en la frontera, y los efectos de varios tratados de libre comercio, principalmente el TLCAN y el TPP. Miembros del panel incluyen al Secretario de Economía de México, Ildefonso Guajardo, al Presidente Ejecutivo del WWC, Andrew Selee, y al Director del Instituto México, Duncan Wood.

To read a transcript of the panel discussion, please click here.

 

A Tale of Two Mexicos: Growth and Prosperity in a Two-Speed Economy 

The Mexican economy exists in two forms: a modern version fueled by cutting edge manufacturing firms as well as large numbers of engineering graduates and as a traditional economy marred by unproductive enterprises and low-speed technology, typically operating outside of the formal economy. This report, conducted by the McKinsey Global Institute, identifies this dualistic nature of the Mexican economy and argues that it has kept Mexico from experiencing substantial growth since joining NAFTA. The study evaluates President Peña Nieto’s current reforms within this framework. The study’s major findings suggest that slow income growth in Mexico is attributed to weak labor productivity and that exponential gains of modern firms have been offset by declines of traditional ones. The report also offers solutions to these issues, namely by encouraging modern firms to expand and increase employment and by calling for the initiation of broad measures to support growth across the Mexican economy.

Coexisten dos versiones de la economía mexicana: una versión moderna, con más ingenieros graduados que Alemania y compañías manufactureras con tecnología de punta, así como una versión tradicional, caracterizada por compañías poco productivas, de escala media, y tecnología por debajo del promedio – que típicamente operan fuera de la economía formal. Este reporte, conducido por McKinsey Global Institute, argumenta que esta naturaleza dual en México ha obstaculizado un desarrollo substancial desde que el país firmó el TLCAN. El estudio evalúa las recientes reformas del presidente Peña Nieto dentro de este marco. Las conclusiones más importantes del estudio incluyen, entre otras, que el poco crecimiento de ingresos en México es atribuido a una débil productividad laboral, y que las grandes ganancias potenciales de aquellas compañías modernas han sido contrarrestadas por el declive constante de aquéllas tradicionales. El reporte también ofrece soluciones a estos asuntos, como fomentar la expansión y mayor contratación por parte de empresas modernas, así como medidas más generales para apoyar el crecimiento a través de la economía mexicana.

Please click the following link to read the McKinsey Global Institute’s report in its entirety: A Tale of Two Mexicos: Growth and Prosperity in a Two-Speed Economy

 

NAFTA’s Uninvited Guest: China and the Disintegration of North American Trade

Enrique Dussel Peter and Kevin P. Gallagher’s paper, NAFTA’s Uninvited Guest: China and the Disintegration of North American Trade looks at the effects on U.S.-Mexico trade as a result of China’s entry into the World Trade Organization (WTO) in 2001. Dussel Peter and Gallagher suggest that NAFTA “has gone through two distinct phases,” with the first phase (1994-2000) being defined by profound regional integration and regional growth “in terms of GDP, trade, investment, [and] employment and wages.” NAFTA’s second phase (2000-current) has been defined by deteriorating levels of trade, investment, and intra-industry trade, with Mexico and the U.S. “losing ground to third countries such as China.” Dussel Peter and Gallagher suggest that China’s ascension to the WTO in 2001 resulted in Mexico losing market share in the U.S., as Mexico could not match China’s efficiency and competitiveness.  Dussel Peter and Gallagher supply several policy recommendations to improve competitiveness between North American countries, including the deepening of a regional and NAFTA policy frameworks across various sectors and institutions to encourage competitiveness and deeper integration between the U.S., Mexico, and Canada.

La publicación de Enrique Dussel Peter y Kevin P. Gallagher, NAFTA’s uninvited guest: China and the disintegration of North American trade, analiza los efectos en el comercio entre México y Estados Unidos como resultado de la entrada de China a la Organización Mundial del Comercio (OMC) en 2001. Dussel Peter y Gallagher sugieren que el TLCAN “ha pasado por dos fases distintas,” donde la primera etapa (1994-2000) fue definida por una integración regional profunda y por crecimiento regional “en términos de PIB, comercio, inversión, empleo y salarios.” La segunda fase del TLCAN (2000-hoy) ha sido definida por niveles deteriorados de comercio, inversión, y específicamente comercio intra-industrial, con México y Estados Unidos “perdiendo terreno a terceros países como China.” Dichos autores sugieren también que la ascensión de China a la OMC en 2001 le costó a México una proporción del mercado americano, dado que México no pudo mantener la eficiencia y competitividad china. Dussel Peter y Gallagher proveen diversas recomendaciones de política, como mejorar la competitividad entre países norteamericanos, incluyendo el fortalecimiento de marcos políticos normativos regionales y del TLCAN a través de varios sectores e instituciones, para mejorar la competitividad profundizar la integración entre Estados Unidos, México y Canadá.

Please click the following link to read NAFTA’s Uninvited Guest: China and the Disintegration of North American Trade, an academic article written by Enrique Dussel Peters, professor at the Graduate School of Economics at UNAM in Mexico City, and Kevin P. Gallagher, associate professor of International Relations at Boston University. 

 

NAFTA, Trade and Development – Mexico and the United States: Confronting the 21st Century

This academic essay takes a critical look at the North American Free Trade Agreement by juxtaposing the agreement’s initial expectations with present day economic realities in Mexico. Blecker and Esquivel argue that while NAFTA did have a significant impact on trade and investment flows to Mexico, it had a modest impact on the variables that matter most, namely employment, income distribution, and growth. The authors conclude that NAFTA failed to reach its full potential due to a lack of complementary policies, which ultimately prevented regional integration between Mexico and the United States.

Este ensayo académico hace un análisis crítico del Tratado de Libre Comercio de Norte América, contrastando las expectativas iniciales del tratado con la realidad económica actual en México. Blecker y Esquivel a argumentan que si bien el TLC tuvo un impacto significante en comercio e inversiones en México, tuvo un impacto modesto en las variables mas relevantes, como empleo, distribución de ingreso y crecimiento económico. Los autores concluyen que el TLC no cumplió su potencial debido a la falta de políticas complementarias, que al final prohibió una integración regional entre México y Estados Unidos.

Please click the following link to read NAFTA, Trade and Development – Mexico and the United States: Confronting the 21st Century, an academic paper written by Robert A. Blecker, professor economics and chair of the economics department at American University, and Gerardo Esquivel, professor of economics at El Colegio de México.

 

Working Together: Economic Ties Between the United States and Mexico

This Mexico Institute report examines the shifting trends in the economic relationship between Mexico and the United States. Reinforced by expanded social networks and foreign investment in both countries. Wilson argues there has been a marked deepening in economic ties. The growing symbiosis between our two economies creates an environment of mutual reliance. Based on this fact, the author argues that it would benefit both countries if their businessmen and policy makers would work together to improve the competitiveness of binational supply chains,  to increase global exports of jointly produced goods, and to evaluate each other’s free trade agreements and border infrastructure to achieve these objectives. Ultimately, the United States should treat Mexico as a partner, rather than a competitor.

Este reporte por el Instituto de México examina los cambios en tendencias en la relación económica entre Estados Unidos y México. Reforzado por largas redes sociales y de inversión extranjera en ambos países, Wilson argumenta que ha habido un marcado crecimiento en los lazos económicos. Esta creciente simbiosis entre ambas economías crea una situación de dependencia mutua. Basado en este hecho, el autor argumenta que le beneficiaría a ambos países que sus hombres de negocios y políticos trabajaran en conjunto para mejorar la competitividad de las cadenas de oferta binacionales, para incrementar las exportaciones de bienes conjuntamente producidos, y para evaluar los tratados de libre comercio de cada país así como la infraestructura en las fronteras para lograr dicho objetivo. Finalmente, Estados Unidos debería de tratar a México como un socio, y no como un competidor.

To read Christopher Wilson’s report, written for the Woodrow Wilson Center’s Mexico Institute, please click the following link Working Together: Economic Ties Between the United States and Mexico

 

Misconceptions on the Campaign Trail: American Workers Can’t Compete with Low-Wage Workers Abroad

The following essay written by Robert Z. Lawrence, from the Petersen Institute of International Economy (PIIE), presents a factual counter to the belief that American workers compete with workers from countries that pay lower wages when goods and production structures are outsourced. The short essay includes examples from Mexico, Vietnam and the manufacturing industry in general.

El siguiente ensayo escrito por Robert Z. Lawrence del Instituto Peterson de Economía Internacional presenta un argumento en contra de la idea errónea, pero común, de que los trabajadores americanos deben competir con aquellos de países donde se paga menos a causa de la externalización de estructuras de producción y manufactura. El reporte incluye ejemplos de la economía vietnamita y mexicana, así como de la industria manufacturera en general.

 

To read the full report, please click here: American Workers Can’t Compete with Low-Wage Workers Abroad

ABOUT THIS PROJECT

The U.S.-Mexico Network’s Imagining 2024 project is designed to provide readers a quick overview of key issues in US-Mexico relations – the background of the issue, its current state, where we ought to be by 2024, and how to get there.

 

Each short essay is coupled with suggested background readings for those interested in a more detailed understanding of the issue at hand.  And as an electronic publication, both the essays and their associated resource pages are updated as needed to keep the information and analysis fresh.
 

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