Mexico and China – A Prosperous Future?

Contributed by Rich Basas of FPA's Migration Blog: 

Rapid double digit economic growth in China and its newly minted membership in the WTO has greatly changed the world economy and China's position as an economic and political power. This view, while prominent within China is more importantly the dominant view among its neighbors abroad. Much of the trade between China and economic powerhouses such as the US and EU have grown exponentially in the last 7 years, so much so that US debt is owed principally to China equaling a third of all US foreign debt and much of the US manufacturing base moving to China for low labour costs in the process.

Fears of losing American jobs have traditionally been the focus of political debate in the US due to the small economic boom in Mexico which formed after the Peso Crisis in the early 1990s. The move of many multinational companies to the southern side of Mexican border to manufacture products from A-Zto be reshipped back into the US at low labour costs has been the cause for much of the anguish of local US labour unions over the last 12 years of NAFTA. While low cost goods have come across the border to American consumers, it also provided much of the employment base for Mexican manufacturing in Mexico and was a strong engine for the Mexican economy throughout the 1990s until today.

With the emergence of China however as the principle manufacturer of the world's goods in recent years and China's emergence as the world's largest economy in the next few years, Mexico has slowly realized that it is being replaced as the principle low cost manufacturer of goods to North America. The realization that Mexico may lose one of its principle engines of its economy to China has lead to more involved policy towards China. A push for a bilateral investment agreement took shape in March 2007 and will be worked out further this June. The hope for Mexico is that a bilateral investment agreement will take shape before the end of 2007 and help reinstall Mexico as a leading trade partner with China and the US. Further relations have taken shape as well, with the two main Unions in China and Mexico in a personnel and information exchange agreed to this month and future commercial deals taking shape as well.

It is uncertain where Mexico will be placed in the future economy, but as one of the leading nations regarding trade agreements abroad, Mexico will use any advantage it has to maintain recent success in the Mexican economy past its early NAFTA years.

For more information on the stories:
Mexico's Foreign Trade Strategy in Trouble: The Impact of China –
(G.Bracho: Oxford University)
Mexico, China to push forward Bilateral Investment Agreement – (China View)
Mexico, China trade union to include worker exchange – (China View)
China's ZTE to build massive WiFi network for Mexico City – (Information Week)