U.S. Mexico Trade Relationship Under NAFTA: Modernization and Opportunities

Transcription

1 U.S. Mexico Trade Relationship Under NAFTA: Modernization and Opportunities August

2 Mexico is a growing economy Mexico has built a solid framework for macroeconomic stability in the past two decades Total Exports $409 billion GDP $1.0 trillion economy $829 billion in total trade $502 billion in FDI attracted since million consumer market/ 60% middle class 1.4% 2013 The 15 th largest world economy 8 th largest world exporter and 1 st in Latin America 8 th largest world importer 5 th leading recipient of FDI among emerging economies 2.3% % Total Imports $420 billion 2.3% 2.3% 2017 Source: INEGI, SE-DGIE (Dec. 2017), WTO, UNCTAD, Brookings Institution, SHCP. 2

3 Mexico is one of the most open economies Mexico s trade policy has provided the backbone for growth in the economy and a rapid expansion in foreign trade. Trade to GDP ratio grew from 30% in the early 90 s to 78% currently, reflecting the relative importance of international trade to the economy. Trade as a % of GDP Mexico 78% Canada 64% USA 28% Source: Google Public Data based on World Bank. 3

4 $ Million Mexico has also become a diversified export-oriented economy Over two decades of sound macroeconomic policies and free trade policies are paying off: Mexico has transformed its export structure into a manufacturing global powerhouse Mexican Exports Petróleo Manufactura Otros 89% Mfg % Oil Source: SE-NAFTA with data from INEGI 4

5 Mexico is one of the most open economies Mexico s FTAs network includes 46 countries which account for 70% of world GDP, two-thirds of global imports and a billion consumers. EFTA 1.1 T 1.3 T 349 JAPAN CENTRAL AMERICA NAFTA 20.1 T 2.7 T 7. T PANAMA COLOMBIA EUROPEAN UNION 16.5 T 5.3 T 9.1 T ISRAEL T 1.4 T PERU CHILE URUGUAY IMF WTO UNCTAD 2.9 GDP (billion dollars) IMPORTS (billion dollars) FDI (billion dollars) IMF WTO UNCTAD 2016 FDI outward stock 5

6 Mexico s ambitious trade agenda EFTA PACIFIC ALLIANCE CANADA T BRAZIL 1.8 T ARGENTINA T 1.3 T 333 EUROPEAN UNION IMF WTO UNCTAD 16.5T 9.1 T 5.2 T JORDAN GDP (billion dollars) IMPORTS (billion dollars) FDI (billion dollars) TURKEY CP TRANS-PACIFIC PARTNERSHIP AUSTRALIA 4.9 T 608 JAPAN 1.4T 1.3 T VIETNAM MALAYSIA SINGAPORE NEW ZEALAND IMF World Trade Organization UNCTAD 2016 FDI outward stock 6

7 North America: a dynamic economic powerhouse NAFTA created a thriving regional market of 490 million people and a combined GDP of over $21 trillion. Regional GDP (trillion $) North America exports $2.2 trillion in goods worldwide United States Canada North America represents 18% of global exports Mexico 1.0 Source: SE with data from IMF and WTO. 7

8 Recognizing the importance of NAFTA Trilateral trade has more than tripled, reaching $1 trillion in Trilateral Trade between the NAFTA Partners NAFTA ,122 1,075 1,059 1,033 1, , Mexico-Canada Trade U.S.-Canada Trade Mexico-U.S. Trade Source: SE with import data from Statistics Canada, Banxico, and USDOC, and World Bank. 8

9 NAFTA boosted Mexico s trade with Canada Canada s Main Trading Partners US 61.2% Others 20.9% China 8.5% Mexico 4.4% UK 2.4% Japan 2.6% Mexico-Canada trade increased nine-fold, reaching $37 billion in 2017 Mexico is Canada s 3rd largest trading partner Source: The Ministry of the Economy with data from Statistics Canada and BANXICO 9

10 $ Billion Last year, U.S.-Mexico trade hit an all-time high Bilateral trade is nearly seven-times bigger than before NAFTA Mexico is the U.S. third-largest trading partner $1.5 billion dollars in products are bilaterally traded each day a million dollar a minute business U.S.-Mexico Trade Source: USDOC. NAFTA US Exports to Mexico US Imports from Mexico

11 Mexico is the U.S. s second-largest export market and second-largest supplier of goods U.S. exports to Mexico reached $243 billion last year, which represents 16% of its sales worldwide. U.S. imports from Mexico reached $314 billion. Mexico has a market share of 13% of US total imports. U.S. Exports 2017 U.S. Imports 2017 Mexico Buys more than: BRICS UK, Germany, France & Italy Mexico Supplies more than: Japan, Taiwan, Singapore, & South Korea Hong Kong, Taiwan, Singapore, & South Korea China UK, Germany, France & Italy 270 Billion dollars Billion dollars Source: USDOC. BRICS includes Brazil, Russia, India, China, and South Africa 11

12 U.S. Mexico trade is not only large, but also diversified 2017 US-Mexico Trade by Sector US imports from Mexico US exports to Mexico Transportation equipment Computer & electronic products Electrical equipment 16.8 Machinery Chemicals Primary metal manufacturing Fabricated metal products Processed foods Agricultural products Oil refined products Plastics Oil & gas Source: SE-Washington with data from USDOC Billion of US dollars 12

13 and highly integrated, strengthening supply chains in key industries ELECTRIC-ELECTRONIC $146 billion dollars in electrical and electronic equipment are traded between Mexico and the U.S. per year. Mexico is the leading home appliance exporter in Latin America, and the 6 th globally. Leading flat television screen exporter in the world. The second refrigerator exporter. AUTO & AUTO-PARTS Mexico is the 7 th largest producer and 4 th exporter globally of new light vehicles in the world. $131 billion dollars in cars and parts are traded between Mexico and the U.S. annually. 13% of light vehicles sold in the U.S. were produced in Mexico. Mexico is the main auto parts supplier to the U.S. The Mexican auto parts industry became the 5 th largest in the world. Source: SE with data from Brookings Institution, US Census Bureau, Banxico, and Comtrade. 13

14 Mexico is a strategic production partner for U.S. goods and exports worldwide When Mexico exports, the United States exports. There is a 40% U.S. value-added in Mexico s exports to the U.S. 40% U.S. value added in final exports of selected countries to the U.S. 25% U.S. exports also benefit from Mexico s network of free trade agreements with 46 countries, providing preferential market access to 70% of world GDP and two-thirds of global imports. 8% 5% 4.0% 2% MEXICO Mexico Canada Malaysia South Korea China Japan Mexico and the United States do not simply trade goods; we work together to manufacture them Source: NBER, Global Value database in Koopman, Powers, Wang, Wei (September 2010, revised March 2011) 14

15 Most of the products bilaterally traded are intermediate products Mexico's Imports from the US By Type of Goods $Billion Mexico s Imports from the US 2017 Finished goods 14% Capital goods 7% Intermediate goods 79% Capital Intermedios Finales Mexico's Exports to the US by Type of Goods $billion Mexico s Exports to the US 2017 Finished goods 25% Intermediate goods 40% Capital goods 35% Capital goods Intermediate goods Finished goods Source: SE-Washington with data from Banxico 15

16 U.S.-Mexico Trade in Services US Exports US Imports $23.8 B $9.7 B $14.1 B and we can further expand trade in more sectors: U.S.-Mexico trade in services has doubled since Telecommunications 3% $59.5 B Financial services Travel $26.3 B $33.3 B Royalties 10% 5% Transport 14% Telecommunications 5% Financial services 2% Royalties 3% Transport 11% U.S. EXPORTS Other 16% U.S. IMPORTS Other 17% 52% Travel 62% Source: USDOC with data from BEA. Trade in services by sector with 2016 data. Financial services include financial and insurance services, telecommunications include IT services, royalties include charges for the use of intellectual property. 16

17 North America is emerging as a global energy power Mexico is the US largest energy market, consuming over $26 billion in energy goods Canada is the US biggest energy supplier, providing over $73 billion in commodities 2017 US trade in energy with Mexico and Canada totals $129 billion, accounting for 40% of its total trade Source: SE-Washington with data from USDOC, HTS codes $2.4 B $5.1 B $50.1 B $4.8 B $7.3 B $2.0 B $184 M $2.5 B $6.1 B $5.5 B $2.5 B $8.7 B $11.9 B $2.0 B $2.5 B $1 B $9.8 B Electricity Crude oil Natural gas Diesel & fuels Gasoline Liquefied gases 17

18 $ Billion US Mexico agricultural trade has multiplied by seven since NAFTA Mexico is the 3 rd largest international market for US agricultural products and its largest source of imports NAFTA U.S.-Mexico Agricultural Trade US Exports to Mexico US Imports from Mexico Source: USDOC. Agricultural products include chapters 1 24 HS 18

19 Mexico is an important export destination for each U.S. state Mexico ranks among the top 3 export markets for 32 states Mexico s Share in U.S. Exports by State 2017 Source: SE- NAFTA with data from Wisertrade. 19

20 Nearly 5 million U.S. jobs depend on trade in goods and services with Mexico U.S. Employment Related to Trade in Goods and Services with Mexico (Jobs in thousands) OR CA #REF! WA NV 43.6 AK ID UT 46.7 AZ 89.3 #REF! MT 16.8 WY 9.1 CO NM NE KS TX ND SD 33.9 OK #REF! 50.6 MN 92.9 IA 53.1 MO 97.4 AR WI 41.6 LA #REF! IL #REF! #REF! 99.7 MS IN MI #REF! 95.5 WV OH #REF! KY AL TN GA VT VA NC #REF! SC FL NY PA #REF! NH 22.1 MA118.5 RI CT NJ DE ME MD 96.5 HI 23.6 Greater than Less than 50 Source: Jobs figures are from 2014, according to Growing Together: Economic Ties between the United States and Mexico, Mexico Institute, Woodrow Wilson International Center for Scholars,

21 Mexico has become a magnet for investment The U.S. is Mexico s #1 source of foreign direct investment, accounting for 49% of total FDI. 14 More than 65,000 companies in Mexico have FDI. Accumulated FDI in Mexico Billion dollars U.S Others Telecom. 4% Minig 5% Commerce 8% FDI in Mexico by industry as a % of total Other 20% Financial Services 14% Manufacturing 49% Source: SE-Washington with data from DGIE. Other includes agriculture, utilities, construction, transport and storage, and services such as professional, educational, health, hospitality, entertainment and other. Source: Mexico s Ministry of the Economy. 21

22 Mexican companies support jobs across the US Mexican-owned companies have invested in more than 6,500 business in the US: Employing more than 120,000 workers Mexican companies in the U.S. (density) Source: SE-Washington with data from imapdata

23 Services Mexican investment strengthens US competitiveness, Mexican companies have invested over $58 billion in the US and export more than $1 billion to the global market Food Manufacturing Cinepolis IUSA Cemex Kaltex Famsa Softtek Bimbo America Movil Gruma Femsa DeAcero Bio-Pappel GCC Coppel Lala Qualfon La Costeña Sigma Mexichem Interceramic Chedraui Carso Frugo Alimentos Neoris Omnilife Bachoco Condumex Corporacion EG Azteca BBG Wireless Zucarmex Elamex Lamosa Alpek America Televisa Minsa Helvex Arca Grupo Bal Grupo Mexico Monex Continental Nemak Vitro Banorte Vector Industrias CH Kuo Interacciones Enlace Verzatec Xignux Financial Grupo Rassini Automotive services Metalsa Salinas GIS Katcon Source: SE-Washington with information from SelectUSA. */ FDI figure from IMF Coordinated Direct Investment Survey (CDIS), using outward position (stock) data

24 Mexican company Deacero manufactures and supplies steel products for the construction and industrial sectors. Deacero produces wires, nails, and staples in a plant located in Poplar Bluff, Missouri, using recycled-steel produced in Mexico. Deacero has a second plant in Houston, Texas and provides over 700 jobs in the US. and contributes to the economy of local communities Cemex is the second-largest cement manufacturer in the U.S., literally helping to build the foundations of America s cities and towns. Cemex operates a state-of-the-art energy-efficient cement-plant in Clinchfield, Georgia, which employs over 120 local workers. With a population of 650 people, the economic base of Hayden, Arizona is the Asarco Hayden Smelter, part of the Grupo Mexico family since 2009 which is the third largest copper producer in the United States. Asarco employs over 1,300 workers in its Hayden facility. The U.S. division of Mexico City-based Grupo Bimbo, the largest bread producer in the world, has a large presence in Hazleton, Pennsylvania, providing over 380 local jobs in order to produce and package its leading brands such as Sara Lee, Orowheat, Stroehmann s, Arnold, and Thomas English Muffins. Mexico s Rassini, a global technology leader in the design and production of high quality suspensions and brake components within the automotive industry, has a manufacturing facility in Mt. Morris Township, Michigan and a Technology Development Center in Plymouth, also in Michigan that provide highskilled jobs. Metalsa, a Mexican manufacturer of structural components for vehicles sold in the global market, has a manufacturing plant that produces auto parts located in Roanoke, Virginia, supporting more than 200 local jobs. 24

25 Challenges 25

26 NAFTA 2.0 A NAFTA 2.0 should be based on three basic elements: 26

27 Mexico s priorities in the negotiations of the NAFTA Preferential access SOEs Obstacles for free trade Regional competitiveness Regulatory harmonization government procurement Certainty in trade and investments dispute settlement mechanisms Cooperation & Development Investment Competition Temporary entry SMEs Energy integration Environment Inclusive & Responsible Trade Gender Opportunities of the 21 st century economy Digital trade Intellectual property Anticorruption 27

28 NAFTA modernization process May 18 USTR notified Congress Jul 17 US negotiation objectives sent to Congress Jul 27 MX: Report on the start of negotiations to the Senate Aug 10 MX: Public Forum Aug 16 Round 1 Washington Sep 23 Round 3 Ottawa Nov 17 Round 5 Mexico City Feb 25 Round 7 Mexico City Jun 26 Start Jul 26 End Aug 2 MX: Negotiations priorities Aug 14 Canada: objectives Sep 1 Round 2 Mexico City Oct 11 Round 4 Washington Jan 23 Round 6 Montreal Apr-Aug Permanent sessions Washington MX: Public Consultations by Internet 28

29 Trade and NAFTA Office SECRETARIA DE ECONOMIA MEXICO MX-US Trade More information: Francisco Sandoval Saqui Or Washington, DC 29