NDN/NPI Backgrounder: US-Mexico: A Vital, Modern Economic Partnership

Submitted by Emma Buckhout on 1/30/14

Full memo pdf attached

In the next few weeks, the Obama administration embarks upon two significant trips to Mexico. From February 3rd to 7th Secretary of Commerce Penny Pritzker will lead her first trade mission to Monterrey and Mexico City accompanied by a delegation of representatives from 17 major US businesses. On February 19th, President Obama will join Canadian Prime Minister Stephen Harper and Mexican President Enrique Peña Nieto at this year’s North American leaders’ summit in Toluca, Mexico. Both trips are expected to include discussions of economic competitiveness for the region, trade and investment, and security.

These crucial dialogues coincide with the 20th anniversary of the entry into force of the North America Free Trade Agreement, ongoing US Congressional efforts to pass meaningful immigration reform legislation, as well as Trans'Pacific Partnership negotiations. We must evaluate and better understand the gains of the last two decades for both the US and Mexico as our leaders seek to build upon them moving forward. As we look to the next twenty years, the US has the opportunity to deepen its partnership with Mexico and North America, to strengthen economic development, job creation and social growth in the US and abroad, and to ensure that the US and North America remain strong in an age of increasing global competition.

We offer up the following backgrounder on the current state of our southern neighbor Mexico and our North American partnership. While there is still more to do, Mexico has made tremendous strides toward becoming a modern, democratic, economically developed country since the implementation of NAFTA. As it has modernized and opened its economy, trade between the US and Mexico has skyrocketed and supports six million US jobs. The Trans Pacific Partnership could be a means of further strengthening and expanding that growth.

See the following for more information.

Background on Mexico, North America

Since 1993, the year before NAFTA went into effect, Mexico’s:

Population has grown from 91.7 million to 120.8 million people, 12th in the world (with EU considered one unit).
Poverty rate has dropped from 69% to 52% (1996-2012).
Life expectancy has increased from 72 to 77 years in 2011.
Fertility rate has dropped from 3.1 to 2.2 births per woman in 2011.
GDP has more than doubled from $510 billion to $ 1.178 trillion in 2012 (GDP, current international $).Mexico is the 12th largest economy in the world today. Estimates say it will be the 5th in a generation.
Per capita income has doubled from $8,469 to $16,734 in 2012 (GDP per capita, PPP, current international $).

Skyrocketing US-Mexico trade and tourism, job growth, and progress at the border:

US-Mexico trade goods and services trade has increased six-fold, from $80 billion to over $500 billion. Mexico is now the US’s third largest trading partner, second largest export market. We trade more with Mexico today than Japan, Germany and the UK combined. Mexico buys twice as much from the US as China does, with 1/11 the population, and more from Brazil, Russia, India and China (the BRICs) combined.
Mexican tourism to the US ranks second for number of visitors to the US and fourth for level of spending in the US.
14 million jobs in the US are dependent on trade with NAFTA countries, 6 million with Mexico alone.
10% of people living in the US today are of Mexican origin, and about 10% of people born in Mexico live in the United States.
In recent years, net migration from Mexico to the US has dropped from 770,000 to zero.
Despite massive organized crime violence in Mexico, the border on US side is safer- the two safest large cities in the US according to violent crime rates are El Paso and San Diego.
While Mexico faces great challenges in strengthening its rule of law and eliminating the threat of organized crime, the US shares in that challenge. Violence in Mexico has been significantly driven by US drug habits, and weak response to guns smuggled from the US into Mexico.

Mexico is becoming a modern country:

After 70 years of single-party rule, Mexico has transitioned to a more liberal democracy. It successfully transferred party rule in the 2000 and 2012 presidential elections. Its executive, legislative, and judicial branches operate independently, as does the Church and press from the state.
In the past year, President Enrique Peña Nieto has championed an ambitious reform agenda, including education, telecommunications, taxes, energy, elections and more.
Mexico has transformed from a protectionist state to one of the most open countries- it has free trade agreements with twice as many countries as the US does.
At Davos, Mexico was specially acknowledged among OECD countries for its growth and reforms, and received over $7 billion in investments from major corporations.

Images: Among Major US Trading Partners, NAFTA Countries Buy More Goodsand Support More US Jobs
(See attached for more images)

U.S. Trade With NAFTA

Source: U.S. Census Bureau Credit: Danny DeBelius, Emily Siner / NPR

Further Reading:

General Background

Reassert U.S. Leadership of a Liberal Global Order, Robert Kagan and Ted Piccone, Brookings, January 23, 2014
The Future of Jobs: The Onrushing Wave, The Economist, January 18, 2014
The Most Important Chart in American Politics, Michael Scherer, Time, NDN, February 4, 2013

TPA/TPP

Global Trade Grows Main Street, Amb. Michael Froman, Office of the United States Trade Representative, January 24, 2014
A New Path on Trade Deals, Editorial Board, Los Angeles Times, January 26, 2014
Mr. President, Don’t Back Down on Trade in the State of the Union, Amy Liu, Brookings, January 27, 2014

Mexico/North America