While the current US administration is re-examining the North American Free Trade Agreement and finding issues with the trade deficit, it is worth considering the impact of trade between the United States and Mexico and examining the history between these two neighboring nations.
In the following excerpt from the forthcoming 2nd edition of Mexico: What Everyone Needs to Know, Roderic Ai Camp explores how Mexico has contributed to the US economy in recent years. The crucial role Mexico has played in the US economy is carefully analyzed, focusing not only on the country as a whole, but the impact Mexican trade has had on individual states.
Mexico has played a significant role in the rapid expansion of US exports in the 1990s and 2000s. Mexico has alternated between being the second and third most important trade partner of the United States in the past decade. In 2014, the United States exported a total of $240 billion worth of goods to Mexico, the most important of these products coming from the computers and electronics, transportation, petroleum, and machinery sectors. Canada purchased $312 billion of our exports in 2014. China purchased only $124 billion of US exports. Exports to Mexico accounted for approximately 1,344,000 jobs in the United States in 2014.
California alone, boasting the eighth-largest economy in the world, exported more than 15% of its products to Mexico in 2014, exceeding what it trades with Canada, Japan, or China. As of 2014, Mexico’s purchases of California exports supported nearly 200,000 jobs in the state.
In fact, 17% of all export-supported jobs in California, which account for a fifth of all individuals employed in the state, are linked to the state’s economic relationship with Mexico. More than half of those export-related positions can be traced to the North American Free Trade Agreement.
“As of 2014, Mexico’s purchases of California exports supported nearly 200,000 jobs in the state.”
California and Texas, the two largest economies in the United States, which are two of the three largest state/provincial economies in the world, are significantly influenced economically by Mexico. Six states, in 2014, Arizona (41%), New Mexico (41%), Texas (36%), New Hampshire (25%), South Dakota (23%), and Nebraska (23%), depended heavily on Mexico to purchase their exports. The GDP of the United States and Mexican border states accounts for a fourth of the national economy of both countries combined, exceeding the GDP of all the countries in the world except for the United States, Japan, China, and Germany.
The United States provides the largest amount of direct foreign investment in Mexico, but Mexican entrepreneurs and venture capitalists invest in the United Sates. By 2013, Mexico had invested $33 billion, the only emerging economy among the top 15 countries with direct foreign investments in the United States. In 2015, Pemex, the government oil company, opened the first retail gasoline station in the United States, in Houston, and plans on opening four more in that city.
This is a pilot project to test the American market nationally. OXXO, another Mexican firm, has opened two convenience stores in Texas, and plans on investing $850 million to open 900 stores in the United States. Finally, Mexico also influences the US economy through tourism in the same way that US tourists play a central role in Mexico’s economy. In 2014, fully 75 million foreigners visited the United States, generating $221 billion. Canada accounts for the largest number of visitors each year, followed by Mexico, whose 17 million tourists in 2014 spent $19 billion. Along the border, at the end of the decade, Mexican visitors generated some $8 billion to $9 billion in sales and supported approximately 150,000 jobs.
Featured image credit: “Ciudad Mexico City” by Alejandro Islas. CC BY 2.0 via Flickr.