After more than two decades of intensifying collaboration, the United States and Mexico face uncertainty and tension. This is no small matter—the countries have become increasingly interdependent in an age of constant change, in which collaboration frequently results in a better return on investment.
Are Mexico and the United States partners or competitors? The new U.S. administration knows what it thinks—it has recently depicted Mexico as an opponent that threatens both U.S. businesses and workers. Yet U.S.–Mexico relations are of vital interest to both nations. In recent decades, the countries have taken numerous steps to increase coordination in sectors ranging from trade to ecology, and this makes sense: they share a 2,000- mile border. Yet in the coming years, it is likely that the relationship will be critically re-examined by both sides. As pundits and politicians have already discovered, there is much to explore.
THE NEED FOR NEW LABELS
Today, thanks in part to NAFTA, Mexico and the United States boast one of the world’s strongest and most integrated economic relationships. The United States is Mexico’s greatest merchandise trading partner, and Mexico ranks below only Canada and China for the United States. In 2016, the United States sent US$231 billion in exports over the southern border, while Mexico exported US$294.2 billion north. Both countries have seen increases above 400 percent—Mexico nearly 600 percent—in these numbers since 1994. And it is worth pointing out that a small but significant trade in services also runs between the two nations; the United States runs a modest trade surplus of US$7.6 billion in this sector.
These numbers, while impressive, do not tell the whole story. The Wilson Center’s Mexico Institute sought to articulate just how trade between the two countries occurs. The evidence they found points to increased cooperation between U.S. and Mexican companies, rather than unfettered competition. Instead, as many have noted over the years, “they build things together.” Manuel Sánchez, Deputy Governor of Banco de México, notes that the industrial and manufacturing outputs of the two countries are highly correlated. “Furthermore,” he adds, “causation runs from the larger country to the smaller one. Inevitably, U.S. manufacturing fragility translates into a slower sector in Mexico.”
Thanks to the lack of trade restrictions, U.S.-based car manufacturers ship car parts to Mexican companies that then ship back completed automobiles—just one of many examples of growing partnership in the border region. This picture is borne out in the numbers, too, with Mexican industries taking US$140 billion in U.S. intermediate goods in 2015, and U.S. firms reciprocating to the tune of US$111 billion. This sort of cooperative production allows companies on both sides of the border to specialize in their comparative advantages and bring goods to the market at significantly lower costs. It also might warrant a new “Made in USA and Mexico” designation for goods ranging from washing machines to airplanes.