The US & Mexico Trade Relationship Overview | NAPS
April 16, 2015
Open trade policies between nations provides a great variety of benefits to both nations. Throughout the course of history, large nations have traded with smaller ones and in general all parties are better off because of it. For the United States, when people think of trading partners most people first think of Asia and Europe. However, one of the most important trading relationships for the United States is actually Mexico. Not only do many people from Mexico immigrate in to work, but there are also a variety of good manufactured in Mexico that are sold in the United States. Understanding this trade relationship is integral to understanding the economies of both nations.
Economy Of Mexico
The economy of Mexico is a complex one, as it is essentially a tale of two different classes of people. In Mexico, there really is not a large middle class at all. There are some extremely wealthy people, like Carlos Slim, but the vast majority of people who live in Mexico are laborers who are in the lower economic classes. Due to the nature of their economy, the Mexican people make for a large and willing labor force.
As time has gone on, many nations like the United States have started to understand the value of having products made in Mexico. Manufacturing in Mexico is cost effective like manufacturing in Asia. However, there is a huge difference in transit time along with transportation costs associated from importing products in Asia, giving imports from Mexico an additional advantage. Many large corporations in the United States have also started to see the benefits of sourcing product from Mexico due to the shorter lead times. There is a vast difference in lead times from thirty days to over ninety or more that many companies in Asia have.
Manufacturing in Mexico has not always been a clean process. Many years ago, there were few regulations put in place for any sort of labor. Therefore, the quality of the products and the labor treatment essentially varied greatly from one factory to the other and was really dependent on who owned the factors of production. Several years ago, the leaders of Mexico realized that they needed to put in place concrete regulations that would make sourcing products out of Mexico more attractive for both companies and nations. Different regulations have been put in place, and more will in the future as well, that make the entire manufacturing and labor process in Mexico much more efficient, ultimately benefitting Mexico and US trade.
The United States
The United States benefits greatly from these changes in the reform structure of Mexico. There are a large variety of industries that operate in Mexico ranging from automotive and metal to clean energy. Due to the variety of different industries that are serviced out of Mexico, the quality of the products and services will have a huge impact on the economy of the United States. In the future, look for many companies to continue to increase their share of products sourced from Mexico that they sell to customers and take note of the growing US trade with Mexico.