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USA and Mexico Trade Relations Assignment Help

Current Business topic is about Trade between the U.S. and Mexico.

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Introduction

The United State and Mexico share a border of 2000 miles and it has 55 active ports through which bilateral trade take place. The livelihood of the people of these 2 countries depend on the trade between them and there are several areas in which these 2 countries depend on each other, namely for citizen security, economic reform, education exchange, entrepreneurship, energy cooperation, innovation and other areas.

Mexico the second largest market of USA's after Canada and their third largest trading partner after Canada and China. Exports from USA to Mexico include electrical machinery, plastics, vehicles, mineral fuels and machinery. 80 % of Mexico's trade exports go to USA. USA is Mexico's second biggest export market for natural gas and refined petroleum products. The stock of FDI by USA companies in Mexico is $107.7 billion and Mexican investment in the USA is $18 billion (Gwartney, 2016).

The study will look into the trade relation that USA and Mexico shared in the recent past, where does it stand at present and what led to the change in the condition of the trade relations

Trade relation between USA and Mexico

The North American Free Trade Agreement (NAFTA) is an agreement of trade between USA, Mexico and Canada that came into force on January 1994. Its trade terms were implemented gradually till 2008 and it resulted in doing away with tariffs on products between these 3 countries. The important areas that were carefully looked into were liberalization in textiles, agriculture and automobile manufacturing. It aimed to protect intellectual property, set up dispute resolution mechanism and implement environmental and labor safeguards (Hakobyan & McLaren, 2016).

Villareal & Fergusson (2017) have put forward that regional trade increased hugely over NAFTA's first 2 decades; in 1993 it was $290 billion and in 2016 it was $1.1 trillion. NAFTA has increased trade between the 3 countries by thrice the amount than it was before it came into existence. It created numerous jobs for the people of these 3 countries. It lowered import prices of products like oil from Mexico since there are no tariffs.

NAFTA also had some adverse effects on the involved nations; the manufacturing industry, textile, computer and electrical appliances industry lost almost 7, 50,000 jobs. It put Mexican farmers out of business as by the norms of the treaty; Mexico allowed subsidized farm products into Mexico and farmers were not able to cope up with the subsidized prices. The US companied degraded the condition of the Mexican environment by eventually making them to keep costs low. The agribusiness industry suffered and rural farmers were forced into marginal land to stay in business that led to deforestation and global warming in Mexico (Kirton & Maclaren, 2018).

Trade relation between Mexico and USA at present

The trade relation between USA and Mexico has not remained as hunky-dory as it has been for the last 2 decades. The immigration of Mexicans to the USA has increased manifold hence the present president of USA, Mr. Donald Trump has decided to put heavy tariffs on goods coming from Mexico to the USA. The move has been criticized by the U.S Chamber of Commerce and industry groups who believe that increased tariffs will lead to increased costs for U.S business and consumers. It may adversely affect the U.S agriculture and auto sectors. The new tariffs if brought into effect will lead to replace the NAFTA and Trump is keen on pressing the Congress to approve it (Burfisher et al., 2019).

The present tariff is of 5 % tax on Mexican imports and if the new tariffs come into effect, the tax for imports is going to increase to 25 % after June 10. Mexico is considering a latest trade agreement with USA and Canada in order to resolve the trade tensions. The latest deal termed as the United States Mexico Canada Agreement (USMCA) has been designed by them and was considered by the 3 involved countries. It started to show results as well with the USA lifted its tariff on aluminum and steel tariffs (Gwartney, 2016).
United States Mexico Canada Agreement (USMCA)

The latest agreement of trade between USA, Mexico and Canada is going to be beneficial for ranchers, farmers, businesses and American workers. It will provide reciprocal trade and lead to better paying jobs for Americans and contribute towards the growth of American economy.

The highlights of the USMCA include the following:

- Creating a level area for American workers that comprise newly designed rules for origin for trucks, automobiles, other disciplines on currency manipulation and products.

- Latest protection norms for US intellectual property that ensure opportunities for trade in US services like civil and criminal procedures for cable and satellite and cable signal theft and others

- Providing benefits to American farmers, agribusiness, and ranchers by strengthening and modernizing trade in North America (Schmitz & Seale, 2018)

- Latest chapters that involve Digital trade, Good Regulatory Practices, Anticorruption and ensuring medium and small sized enterprises benefit from the agreement.

- Protection for marine species like sea turtles and whales, prohibition on shark fining and working in collaboration to protect marine habitat

- Policy to improve quality of air, reduce marine litter, support sustainable management of forest and to ensure methods for proper environment impact assessment (ustr.gov, 2019)

Conclusion

The trade relation between USA and Mexico is one of the strong and most prolific one in the recent history. The trade was going great guns until in 2018 president Trump in order to curtail Mexican immigration to the USA decided to manipulate the trade policies between USA and Mexico by increasing tariffs on Mexican imports.

The move may seem to have advantages to the president but it is prone to many adverse effects for both the nations. The NAFTA, the old agreement of trade between USA, Canada and Mexico is in operation now. The countries have agreed to the rebalanced trade agreement and it may come into effect after the fulfillment of the Third Party Administration (TPA) procedures that include a Congressional vote on an implemented bill

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