Trade Issues and Patterns of Mexico

Introduction

Trade is one of the most important elements of a country’s overall economic success. It can significantly influence the federal budget and ensure the financial stability of a state’s regions. Moreover, developed trading relations and a sustained economic situation make a country powerful in different spheres of international collaboration and demonstrate its high living standards. Therefore, the authorities of many countries pay special attention to the development of trade, both foreign and domestic. They thoroughly discuss possible trade strategies and try to correlate them with a country’s current needs.

To study the trade issues and patterns profoundly, an example of a separate country will be used further in this paper. Mexico has been chosen as a country to analyze, due to its essential place in world trade and because of its unstable economic and social situation that can influence trade patterns. The export and import of the country will be examined in detail as the critical aspects of the trade, together with its general trade tendencies and theories.

Mexico: General Information and Main Trade Patterns

It is important to understand that the trade performance of a country depends on multiple aspects: its borders, international relations, territory, and even historical events. Therefore, it would be appropriate to start with the general description of Mexico and its main trade tendencies. Mexico is a country located in the southern part of North America; it is one of the biggest Spanish-speaking countries in the world.

It is a developing country with a GDP reaching the level of $2 trillion in 2013 (International Business Publications, 2016, p. 14). According to recent statistics, Mexico is included in the top 20 most populated countries in the world (Wiradanti et al., 2016, p. 2). The country has both land and sea borders with the neighboring states and is greatly influenced by its major trading partners, such as America and China.

Today, it is difficult to deny that Mexico struggles with a complicated economic situation. For example, Gálvez (2018) states that modern Mexico faces high rates of unemployment and poverty, and many of its citizens immigrate to the US and other countries. At the same time, she emphasizes that the country is still an active importer of various goods (Gálvez, 2018). In addition, it is claimed that Mexico is a prominent exporter as well, and its trading patterns are different from the rest of the region’s states (OECD, CAF, and ECLAC, 2018). Besides, it is important to mention that the geographical position of the country influences its trade details: for example, ports are essential in Mexico, as they are essential trading gateways.

In general, Mexico’s trade patterns can be characterized by relatively slow trade development and stable economic relationships with certain partners. The country is both an exporter and importer of products; it is a participant in multiple trade agreements, such as the North American Free Trade Agreement (NAFTA) (International Business Publications, 2016, p. 14). To analyze the trade tendencies of the country more profoundly, the export and import of Mexico will be discussed separately.

Export of Mexico

The natural resources of Mexico allow it to be an active exporter of fossil fuels. Since the establishment of NAFTA, the Mexican economy “has become increasingly oriented toward manufacturing”, and the country started exporting coal, oil, and metal (zinc, iron, gold, and silver) (International Business Publications, 2016, p. 14). Besides, the climate of the country allows it to specialize in the agricultural sector and export crops like corn, rice, and wheat.

At the same time, some researchers mention that the agricultural export of Mexico is not diverse enough (Diaz-Briquets and Weintraub, 2019). They claim that the range of exported crops, as well as the number of trading partners purchasing such products, are too restricted (Diaz-Briquets and Weintraub, 2019). Therefore, the possible solution to the problem would be to expand specialization areas and establish trading relationships with new economic partners.

The automotive industry also takes an essential part in Mexico’s export. Back in the early 1970s, Mexico became the major exporter of vehicle parts, especially for the United States (Law, 2017, p. 79). In general, America and Canada purchase the most significant amount of the country’s export goods. Eastern countries are also connected with Mexico in terms of trade; according to statistics, eight out of fifteen of Mexico’s leading partners that import the country’s products are located in Asia (Looney, 2018, p. 201). To conclude, Mexico can be characterized as a successful exporter: it shows significant performance in spheres like manufacturing, agriculture, and the mechanical industry. However, import is also an essential economic feature that influences the country’s overall performance, and its main aspects are going to be analyzed further.

Import of Mexico

Even though Mexico is located in a region with a developed agricultural sector and significant availability of fossil fuels, it still needs to purchase some of the products from its trading partners. The country is rich in natural resources; at the same time, it cannot provide all its regions with a sufficient amount of natural gas (Bergsten and de Bolle, 2017). There is also a shortage of construction materials, plastic, and electronics that are mainly imported from China due to cheap transportation and low cost of the products and labor.

Another sphere of import is connected with the automobile industry, even though Mexico itself is an exporter of commercial vehicles and machinery parts (Schaffer, ‎Agusti, and ‎Dhooge, 2017). Today, Mexico’s automobile manufacturing is not developed enough, and the major exporters of automobiles for Mexico are considered to be the US, Japan, and Canada.

In general, the export of Mexico slightly prevails over the country’s imports. At the same time, as Mexico’s export is primarily focused on the mining industry, it has to import a big range of products from abroad. However, in this case, importing cheap goods would be even more beneficial for the country, as Mexico cannot provide items of sufficient quality by itself. Due to the current unstable economic situation in Mexico, the country is unlikely to become self-sustainable shortly, and therefore, has to maintain trading relationships with its major commercial partners.

Trade Theories

The analysis of Mexico’s imports and export allows us to notice that the country is not fully self-sustainable, and it exports produced goods together with importing certain products from abroad. According to some of the researchers, the wealth of a country is guaranteed by maximizing export and minimizing imports, which corresponds to the idea of protectionism (Peng, 2017). Although Mexico does not fully support this theory, some researchers notice that the country still tries to become less economically dependent on the import from its trading partners, for example, America (Wiradanti et al., 2018).

As a result, Mexico tries to expand its trading relations with other countries, especially China or Japan. As Mexico cannot produce certain kinds of goods, it is more appropriate to derive a maximum benefit from the import as well. To demonstrate Mexico’s dominating trade theory, its trading relationships with China can be analyzed as an example.

Mexico is the country specializing in the oil industry; however, it has to import other products like computer equipment and mobile phones. In this case, China is a constant provider of such goods, as the cost of labor and items themselves seem to be lower in comparison to Mexico’s production (Wiradanti et al., 2018). Low transportation tariffs allow Mexico to reduce expenses, and therefore, both countries benefit from mutual trading relationships. This example shows the implementation of the absolute advantage theory, which means that one country can provide particular products more efficiently than its trading partner (Paik, Kwon, and Chen, 2017). Due to the unstable financial state of the country, this strategy may be beneficial for Mexico’s budget.

Conclusion

To sum up, the trade situation in Mexico can be evaluated ambiguously, as it has both positive and negative characteristics. On the one hand, Mexico is rich with certain kinds of natural resources, and therefore, is an active exporter to countries like the US, Canada, China, etc. On the other hand, the area of Mexico’s production is mostly limited to the mining industry, with other spheres being less significant in its export range.

Because the socio-economic situation in modern Mexico is unstable, the government of the country needs to reconsider its trade policy. Production improvements in certain spheres, such as the electronics and automobile industry, can accelerate the growth rate of Mexico’s GDP and its general budget. At the same time, the country needs to maintain trading relationships with its long-term economic partners to ensure financial stability.

Reference List

Bergsten, C.F. and de Bolle, M. (eds.) (2017) A path forward for NAFTA. Washington: Peterson Institute for International Economics.

Diaz-Briquets, S. and Weintraub, S. (eds.) (2019) Regional and sectoral development in Mexico as alternatives to migration. New York, NY: Routledge.

Gálvez, A. (2018) Eating NAFTA: trade, food policies, and the destruction of Mexico. Oakland, CA: University of California Press.

International Business Publications (2016) Mexico export-import, trade and business directory. Volume 1: strategic information and contacts. Morrisville, NC: Lulu.

Law, C. M. (ed.) (2017) Restructuring the Global Automobile Industry. London: Routledge.

Looney, R. E. (ed.) (2018) Handbook of international trade agreements: Country, regional and global approaches. New York, NY: Routledge.

OECD, CAF and ECLAC (2018) Latin American economic outlook 2018: rethinking institutions for development. Paris: OECD Publishing.

Paik, Y., Kwon, J.W. and Chen, D. (2017) Global business: connecting theory to reality. New York, NY: Routledge.

Peng, M.W. (2017) GLOBAL4. Boston, MA: Cengage Learning.

Schaffer, R., ‎Agusti, F. and ‎Dhooge, L.J. (2017) International business law and its environment. Boston, MA: Cengage Learning.

Wiradanti, B. et al. (2016) ‘Trends in trade and port development of rising economies: Mexico and Indonesia’, Logistics Research Network Conference, Kingston upon Hull, United Kingdom. Kingston upon Hull: Chartered Institute of Logistics and Transport, pp. 1-9. Web.

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