Partners, Competitors or Friends? Mexico-China Trade RelationsBy Alessa Flores | Thu, 08/13/2020 - 14:03
China is Mexico's third-largest trading partner in the world, while Mexico is China's second-largest trading partner in Latin America. Both countries are united by strong commercial ties. However, they are also competitors in the US market. Because of this, Mexico should "create a friendly investment environment and develop its supplier base to increase foreign investment attractiveness," explains BX+ Chief Economist Alejandro Saldaña to Expansión News. While USMCA represents advantages for Mexico's competition with China in the US market, there are still opportunities to address. "In the US, Mexico still competes strongly with China in the sector of auto parts, seats, data processing machines, machinery and electronics," said Saldaña.
For several years now, China has positioned itself as a clear competitor in attracting foreign capital to finance its process of integration into the Western economy. In this context, Mexico and China have shown a strong competition for investment in maquila products, according to an article published by Scielo on the balance of competition between Mexico and China in the US market. The same article highlights that China and Mexico compete in exports in terms of destination, international demand for their products, technological capacity, labor force, exchange rate, as well as, customs tariffs and trade barriers. While FTAs bring trade benefits that reduce and, in many cases, eliminate tariff barriers and contribute significantly to competitiveness, there are many other factors at play.
"Today Mexico has already implemented 13 free trade agreements with 49 countries in the world. However, China and Mexico still do not have a legal framework that creates a preferential trade relationship and allows us to be in a situation where trade and investment can occur without barriers, without tariffs and more smoothly," said Luz Maria de la Mora, Deputy Minister of Foreign Trade at a Ministry of Economy ‘s press release.
China accounts for nearly 10 percent of Mexico’s total trade, compared to 63 percent with the US, which is Mexico’s largest trading partner, according to the Ministry of Economy. Given this situation, de la Mora explained that Mexico is in the process of adopting a new commercial vision with China. First, it will seek to identify opportunities beyond North America. Second, Mexico will strengthen its presence in the US but will search trade support among other countries like China.
The lack of a trade agreement with China has generated imbalances for Mexico. Therefore, in the new trade relationship vision, de la Mora explains that Mexico will seek to vindicate this situation. "Mexico is China’s 23rd partner in the world. We are the sixteenth destination for its exports and we are the 30th supplier worldwide. Meanwhile, China is Mexico's third largest trading partner," explains de la Mora.
According to Enrique Dussel, Director of the Center for China-Mexico Studies at UNAM, “Mexico needs a long-term agenda for its relations with China, as well as to find different areas and ways to strengthen mutual ties.” In his work “Opportunities in Economic and Trade Relations between China and Mexico,” Dussel mentions the two countries must recognize that there are gaps in their economic and trade relations and the relationship between their private, public and academic counterparts. Therefore, growing a partnership between the two countries is necessary to create a long-term plan to strengthen relations and mutual benefits.