U.S.-Mexico Trade: Economic Value That is “Hidden in Plain Sight”

1. U.S.-Mexico Trade: Economic Value That is “Hidden in Plain Sight”

2. Recent NACTS Reports

3. North America: Overview Source: CIA World Factbook data 2010-2011

4. Our nation’s prosperity depends on the efficiency and wealth of the North American economic system • Despite the rise of China as an economic power, Canada and Mexico are the U.S.’ number 1 and 3 trading partners (two-way trade). • Canada and Mexico are our number 1 and number 3 foreign suppliers of crude oil, respectively. • Canada and Mexico are our number 1 and number 2 export markets, respectively • For the foreseeable future, Mexico’s economy will continue to grow more rapidly than the U.S.’ economy. • Rise of manufacturing costs in China and of “onshoring” concept may mean a reconsideration and repositioning of Mexico.

5. U.S. Top Trading Partners IMPORT FROM: EXPORT TO: Canada Mexico China Japan United Kingdom Germany South Korea Brazil Netherlands Singapore • China • Canada • Mexico • Japan • Germany • South Korea • United Kingdom • France • Taiwan • Ireland

6. One of the “MIST” Countries is our Neighbor! • MIST = Mexico, Indonesia, South Korea, Turkey (right behind the BRICs) • “By 2050, this middle-income bulge will include six of the N-11 (Egypt, Philippines, Indonesia, Iran, Mexico, Vietnam) and three of the BRICs (China, India, Brazil), and will be responsible for close to 60% of the world’s GDP.“ -Report by Goldman Sachs, July 2008

7. Freight Transportation Networks in Mexico • In 2010 Mexico invested an unprecedented five percent of its GDP in infrastructure. • 76 seaports along its 11,000 kilometers of seashore on the Pacific and Atlantic Oceans, 85 airports, 26,700 kilometers of railroad and 366,000 kilometers of roads. Source: Mexico’s Ministry of Communications and Transportation

8. Mexico’s Free Trade Agreements • Mexico has the second highest number of Free Trade Agreements (FTAs) in the world, which establish an impressive commercial network that covers 43 countries on three continents. • Mexico trades more than Argentina and Brazil combined, and more per person than China. Source: ProMéxico

9. Number of Import Procedures by Country • In 2011 the World Bank ranked Mexico the easiest place in Latin America to do business and 35th in the world, ahead of such countries as Italy and Spain. Source: ProMéxico

10. Mexico’s GDP % Change: 2000-2011 • Goldman Sachs research on the Next 11 Emerging Markets estimates that the Mexican economy will become the world’s fifth largest economy by 2050, putting Mexico ahead of the BRICS. Source: Mexico’s Ministry of the Economy

11. U.S.-Mexico bilateral trade relationship • Cross-border trade with Mexico sustains six million jobs in the U.S. • Mexico is the U.S. second-ranked supplier of petroleum after Canada. • U.S. sales to Mexico are larger than all U.S. exports to the Brazil, Russia, India and China combined, as well as all combined sales to Great Britain, France, Belgium and the Netherlands. • For every U.S. dollar Mexico makes from exporting to the United States, it will in turn spend 50 cents on U.S. products or services

12. Share of Imports to the U.S. – Major U.S. Commercial Partners Source: U.S. Census Bureau

13. Source: Mexico’s Secretaría de Economía U.S. Exports to Mexico: Main Sectors*Billions of U.S. Dollars • Mexico spent more than $163 billion on U.S. goods in 2010 • Mexico is the second largest market for U.S. exports. Source: Mexico’s Ministry of the Economy

14. Trucks Crossing into the U.S. From Mexico Source: U.S. DOT, RITA, Bureau of Transportation Statistics, TransBorder Freight Data.

15. Major U.S. Vegetable Imports from Mexico Source: NAFTA Trade Office with Data from U.S. Department of Commerce

16. Top U.S. States Trading with Mexico*Ranked by: Total Trade (Millions) Source: NAFTA Trade Office and Mexico’s Ministry of the Economy with Data from U.S. Department of Commerce

19. Challenges in U.S.-Mexico Border Management

20. Borders in North America tend to confound management Conceptual challenges: • International relations are difficult to manage, even when you are dealing with close allies (see Keystone XL pipeline, Canada). • A difficult relationship and an often mismatched agenda (read The Bear and the Porcupine by fmr. U.S. Ambassador to Mexico Jeff Davidow!) “Logistical” difficulties: • U.S.-Mexico border is 2000 miles long, with 45 ports of entry and a multi-billion dollar infrastructure deficit. • An extraordinarily difficult security situation in Mexico, which is the result of many factors: southbound flows of guns, cash, and precursor chemicals and northbound flows of undocumented migrants and narcotics. • DHS, a new, complex and very large agency, is in charge of our borders.

21. Unprecedented Security Issues in Mexico • >50K drug trafficking-related murders in Mexico since 2006 • Abuse of Central and South American migrants in Mexico is common (see Amnesty International report from spring 2010). • August 2010 massacre of Central and South American migrants in Tamaulipas. • U.S. border security buildup since the mid-1990s… • Yet: Recent Mexican govt. surge in Ciudad Juarez and Tamaulipas has shown some results. • Yet: Crime statistics in major border-region U.S. cities remain stable or are falling (FBI).

23. CANAMEX Trade Corridor Economic Profile • What stands out: • Lots of room for growth. • Trade corridors are an underexploited resource. • FDI in Mexico is very concentrated in Guadalajara and Mexico City.

24. North American Opportunities and the Sun Corridor, Arizona Councils of Government, November 2009 What is the return on investment of logistics-based economic development?

25. Recommendations • Establish relationships with your local Mexican (and Canadian) consulates and the embassies. • Participate in trade delegations to Mexico. • Talk to Arizona: • Arizona Mexico Commission • CANAMEX Trade Corridor • Arizona International Development Authority • Port Authorities in Yuma, Nogales, Douglas • Talk to the Pacific Northwest Economic Region, http://www.pnwer.org

26. Concluding thoughts • We are in the middle of a large and complex economic shift. • Lots of challenges (security, institution building, education, etc.). • For the foreseeable future, Mexico will probably grow faster than the United States. • The growing wealth of Mexico and others is good news and an advantage; however… • We need to become much more creative and efficient about how we manage both our relationship with Mexico and our shared border.

27. Thank you. Research Team Alejandro Figueroa, Research and Policy Analyst, NACTS Erik Lee, Associate Director, NACTSRick Van Schoik, Director, NACTSContactErik LeeAssociate Director, NACTSTel. (480) 727-8926erik.w.lee@asu.edu