Free Trade Agreements Make Manufacturing in Mexico Prosperous
There are many qualities to Mexico that make the country an ideal location for manufactures: It is strategically located close to the U.S., Canada and Latin America; its government has invested massively in infrastructure and education; labor is skilled and inexpensive; and cultural similarities make conducting business there quite simple.
However, one of the key drivers of manufacturing growth in Mexico is the country's expansive free trade agreements, which have completely transformed its economy and industry.
As ProMexico pointed out, Mexico boasts a network of 13 FTAs with 45 different counties, 32 Reciprocal Investment Promotion and Protection Agreements with 33 countries, nine trade agreements within the framework of the Latin American Integration Association, and more recently became a member of the Trans-Pacific Partnership Agreement. As a result, Mexico has access to more than 60 percent of the world's gross domestic product. To gain a fuller understanding of Mexico's participation in global trade and its value as a location for manufacturing and exporting, it is helpful to know each of the FTAs it participates in the North American Free Trade Agreement.
NAFTA is perhaps the most important FTA Mexico participates in, as when it was made effective in 1994, the country's economy completely changed. At the time NAFTA went into effect, roughly 70 percent of items entering the U.S. from Mexico and 50 percent of goods entering Mexico from the U.S. did so on a duty-free basis. Conversely, 50 percent of U.S. products entering Mexico did so in a similar fashion.
Today, manufacturers in Mexico can export and import goods across the border tariff free.
We also take issue with an American organization like the Offshore Group touting our country’s loss of jobs to Mexico.
Here’s a story the Offshore Group wrote on Goodyear moving to Mexico from 2015:
Goodyear broke ground July 28 for the first plant it will build in the Americas in 25 years, Tire Business reported. The more-than 1-million-square-foot plant will be built in an industrial zone on the southern edge of the City of San Luis Potosi in central Mexico, and involves an investment of up to $550 million.
According to Martin Rosales, president and managing director of Goodyear in Mexico, the facility is expected to be operational by July 2017. “These (financial incentives) are always short term,” Rosales told Tire Business. “Infrastructure is long term. This is much more important than a fiscal incentive.”
Mr. Rosales is correct, infrastructure is long term, and Goodyear building in Mexico is bad for the American people.