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Section 8. Political science
Section 8. Political science
DOI: http://dx.doi.org/10.20534/ESR-16-9.10-160-161
Stolyar Olesya Petrivna, Kyiv National Taras Shevchenko University, Institute of International Relations, Ph. D. student at the Department of International Relations and Foreign Policy
E-mail: [email protected]
The economic dimension of interaction between Mexico and the USA
Abstract: The article examines U. S. — Mexico economic cooperation. It defines the main forms ofAmerican-Mexican interaction, describing in particular the activity of j oint enterprises known as "maquiladoras". Outlined are also the disproportions of bilateral cooperation in this field.
Keywords: USA, Mexico, economic cooperation, "maquiladoras", asymmetry, NAFTA.
Relevance of the research topic. The economic dimension of interaction between Mexico and the USA is a priority area for bilateral relations. External conditions, such as territorial proximity and geographic isolation, close interethnic and trade relations favoured the development of economic cooperation between the two countries, especially in the near-border regions. The conclusion of North American Free Trade Agreement enhanced the economic interplay between these countries to a greater degree. However, the asymmetry of quantitative and qualitative indices is evident in this field of U. S.-Mexico relations, as well as in the majority of other fields. Therefore, the analysis of economic component of bilateral interplay allows for understanding the interests and concerns of both countries.
Analysis of recent publications. The economic dimension of U.S — Mexico relations is widely covered in scientific literature. Among the authors who analyse different issues of economic cooperation between the two countries, one should mention Villar-real M. A. [1], Wilson C. E. [2], Davydov V. M. [3], Semenov V. L. [4]. A large number of publications is devoted to cooperation between the USA, Canada and Mexico within NAFTA, in particular articles of Komkova E. [5] and Ataev M. [6]. The energy dimension of bilateral cooperation is highlighted in the work of Seelke C. R. [7].
Problem identification. This article aims to determine principal spheres of U. S.-Mexico economic cooperation and to identify relevant issues. To achieve this goal the author sets the following tasks: 1) to examine commodity exchange (export/import) and investment between the two countries; 2) to identify the main forms of economic interaction between Mexico and the USA; 3) to define disproportions in this field, especially within joint enterprises.
Results of the research carried out by the author. NAFTA took effect in 1994. Since then the commodity exchange between the USA and Mexico has increased. U. S. export to Mexico in 19932014 rose from $41.6 billion to $240.3 billion and Mexican export to the USA during the same period increased from $39.9 billion to $294.2 billion. Thereafter, bilateral trade flows reached comparable figures, although the overall economic effect turned out to be greater for Mexico (478% export growth from the USA versus 637% export growth from Mexico).
In terms of service trade relations the situation is quite reversed, whilst they are dominated by the northern neighbour. For instance,
service delivery from the USA to Mexico in 2013 amounted to $29.9 billion, while the services worth only $17.8 billion were imported from Mexico, thus American trade surplus in service delivery amounts to $12.1 billion [8].
The USA is the biggest trade partner for Mexico. The main bulk of Mexico's international trade profit comes from export to the USA. In turn, Mexico is ranked only 3ld among the exporters to the USA (after China and Canada) and 2nd as export market for American goods and services (the first rank belongs to Canada). Thus, there is an asymmetry in commodity exchange between these countries which is manifested in Mexico's greater dependence on American market. Given that the share ofAmerican export to Mexico decreased from 83% to 54% between 1996 and 2013, Mexican dependence on the USA as export market decreased slightly, from 84% to 79% in the same period [8].
As soon as NAFTA took effect the American companies started to relocating their production plants to Mexico [5, 77-78]. There was a gradual increase in the number of special raw materials zones and enterprises — "maquiladoras". They operate on preferential terms as regards import and export of goods and services across the American-Mexican border. Upon the introduction of NAFTA, there were already more than 2000 ofmaquiladoras, producing a half of export and import of goods and raw materials between Mexico and the USA [4, 46-47].
Foreign direct investment is an integral part of American-Mexican economic relations since NAFTA conclusion. According to statistical data, the northern neighbour is the biggest foreign direct investment source for Mexico. Stock market of foreign direct investment from the USA has grown from $17.0 billion to $101.5 billion between 1994 and 2013. Mexican foreign direct investment to the USA is much smaller. Shares cost of Mexican foreign direct investment to USA in 2013 amounted to $17.6 billion [9].
However, the opening of Mexican market for investment and creation of raw materials zones lead to certain negative consequences which deepened the asymmetry between the USA and Mexico. First, cooperation with the USA determines the concentration of Mexican production facilities near the northern border, whereas Mexican south states remain depressed. American partners are not interested in the development of the south, whilst cooperation with other Latin American countries cannot boost industrial
The economic dimension of interaction between Mexico and the USA
production. Second, the activities of "maquiladoras" were generally focused on meeting the requirements of U. S. market: raw materials were imported from the USA and not produced in Mexico; only American manufacture technologies were used, since they fully met American standards; all finished products were imported to the USA. Moreover, there are disproportions in the distribution of property ownership: the majority of parent companies for joint American-Mexican enterprises are American by origin [1].
As a result of the abovementioned state of play, the Mexican industrial potential grew increasingly dependent on American market, which has negative impact on Mexican economy. However, this negative effect was not significant, when Mexico was still the leader in exports to the USA.
With the China's economic growth, Chinese manufacturers became serious competitors for the Mexicans on the American market and they gradually pushed out the Mexicans to the third place among the exporters to the USA [3, 140-141.]. This has a considerable impact on the general situation of Mexican manufacturers, as they do not have alternative market, as big as the American market. Mexico appeared not to be ready for open business competition on American markets. All this has a negative impact on the possibility of efficient Mexican participation in NAFTA.
Asymmetry of American-Mexican interplay exists also in the energy sector. Natural gas and oil output and production are important factors of Mexican economy development and of the U. S. energy security. The main market for Mexican oil-and-gas companies is the USA, which testifies to the asymmetric dependence. Over the last years, situation of the biggest state oil-and-gas company in
Mexico — Petroleos Mexicanos (Pemex) — became critical: due to the reduction of natural gas output Pemex fell back on gas import from the USA to provide for its own needs in oil production that increased self-cost of this process. The USA did not agree to raise the purchase price, and so the profit loss and dwindling cost-effectiveness of oil production aggravate the company's finances [7].
Conclusion. The NAFTA creation boosted economic cooperation between Mexico and the USA. The commodity exchange between the countries increased considerably. The USA provided national businesses with a wide market, resources, as well as a particularly cheap labour. Mexico, in turn, received an influx of American investment, succeeded in a certain way in economic development and extended its exports to the USA. Nevertheless, the present study allows for acknowledging the transformation of economic partnership into dependence, where the USA dominate. An economic interaction in particular within joint American-Mexican enterprises is characterised by serious disproportions which deepen technological marginalization ofMexico compared to the USA and prevent the emergence of competitive Mexican goods. The production capacities for high-tech semimanufactured products are concentrated near the American border, thus conditioning the functional structure of Mexican industry and its focus on the USA. There is the same focus on American market in the field of oil and natural gas output and production by Mexican companies. Such a heavy dependence of Mexican export on American market is dangerous for Mexican economy, especially considering the fact that Chinese products partially replaced Mexican goods and Mexico shifted to the third place after Canada and China among the exporters to the USA.
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