A key to modern Mexican-U.S. trade relations lies in the 1994 North American Free Trade Agreement, more commonly known as NAFTA, which was signed by the United States, Mexico, and Canada. NAFTA’s purpose is to eliminate restrictions such as tariffs and quotas on trade and investment among the three participants. After the agreement went into effect, trade among the three countries increased significantly.
As neighbors sharing a nearly two-thousand-mile border through two centuries, the United States and Mexico have long been important trade partners. The United States has long been Mexico’s biggest trading partner, and after the adoption of the
In 1965, the
Maquiladoras import most of their materials and equipment (generally from the United States), assemble and manufacture products, and then export the finished goods, often to the countries from which they imported the materials. Mexico imposes no duties or taxes on the incoming materials. After NAFTA was signed, manufacturers no longer even had to pay duty on the value-added portions of their finished goods.
Maquiladoras produce electric equipment, clothing, plastics, furniture, appliances, and automobiles and auto parts. The maquiladora industry is second only to oil in producing income from exports to foreign countries. In addition to the United States, other countries, including Japan and Germany, have established factories in Mexico to take advantage of NAFTA and Mexican government inducements under the maquiladora plan. The program’s chief attraction has been the low cost of Mexican labor. However, new competition from low-cost Chinese labor has caused a substantial number of Mexican factories to close.
During the early twentieth century,
The Mexican oil industry is managed by a government bureaucracy,
Immediately before NAFTA was signed in 1994, the two-way trade in
Some Mexican peasants have complained about the competition they have encountered from American agricultural products because of the cost benefits of mass-production methods in the American agricultural industry. Farmers in Mexico’s interior states have been at a further disadvantage in shipping their products because of the comparatively poor railroad and highway facilities. However, American NAFTA officials have contributed millions of dollars to help improve marketing facilities for local Mexican farmers.
Mexico’s third-largest generator of foreign exchange is
A serious downside of the tourist boom has been an increase in attacks by criminal gangs on foreigners, many of whom use their visits to Mexico to seek out recreational drugs. This problem is aggravated by the efforts of Mexican gangs to use tourists to carry illicit drugs into the United States. The problem has become so acute that the government of Mexico has employed its army to combat criminal activity.
Of great importance to the economy of Mexico is the substantial amount of money that immigrant workers in the United States remit to their families in their homeland. The approximately ten million Mexican laborers in the United States remit at least $20 billion a year to Mexico. These remittances constitute one of the most important sources of foreign exchange in Mexico. An estimated 6 percent of all Mexican households benefit from this influx of U.S. money. Families in four states in particular–Michoacán, Durango, Guanajuato, and Zacatecas–account for more than one-third of the total amount. Any substantial reduction of remittances resulting from tighter border controls could have a drastic impact on many Mexican families.
Virtually all studies of Mexican immigration into the United States agree that a continual supply of Mexican workers to the United States is critical to the economies and trade development of both countries. Mexico on its own cannot provide the necessary jobs for its rapidly growing population, and the United States cannot fill all the unskilled and semiskilled jobs required for its own economic expansion.
Bognanno, Mario F., and Kathryn Ready, eds. The North American Free Trade Agreement: Labor, Industry and Government Perspectives. Westport, Conn.: Quorum Books, 1993. Report on a 1991 conference in Minneapolis at which representatives of labor, industry, and government from the United States, Mexico, and Canada discussed a wide range of issues relating to NAFTA. Irwin, Douglas A. Free Trade Under Fire. Princeton, N.J.: Princeton University Press, 2005. Discusses two major threats to the global expansion of American free trade–protectionism adopted by individual countries to defend their own industries and the actions of so-called public interest groups that seek to block free trade progress. O’Driscoll, Gerald P., ed. Free Trade Within North America: Expanding Trade for Prosperity. Boston: Kluwer Academic, 1993. Twenty-one experts on foreign trade met in Texas in 1991, sponsored by the Federal Reserve bank of Dallas, to measure the potential for expanded global trade and the problems that this expansion presents. Von Bertrab, Hermann. Negotiating NAFTA: A Mexican Envoy’s Account. Westport, Conn.: Praeger, 1997. Detailed account of the work of the Mexican negotiating team, headed by the author, an experienced Mexican financier, charged with addressing the concerns of internal Mexican groups as well as the multiplicity of American interests, with a tentative agreement for a proposed trade treaty. Weintraub, Sidney. NAFTA: What Comes Next? Westport, Conn.: Praeger, 1994. The author, an experienced economist with a deep understanding of Latin American political and economic affairs, discusses the future for international trade and the role that NAFTA is playing in its global expansion.
Asian trade with the United States
Canadian trade with the United States
Chinese trade with the United States
European trade with the United States
International economics and trade
Japanese trade with the United States
Latin American trade with the United States
North American Free Trade Agreement