Experts believe that the country should use its trade agreements better and more intensively to strategically diversify imports and exports outside of North America.
Although it intends to sign two more, Mexico still does not take full advantage of the Free Trade Agreements (FTA) that it already has in force and that makes it one of the most open economies abroad.
The effects on the supply chains caused by the pandemic in the last two years have put their future commercial strategies on the table for government discussion to diversify markets for their product exports and imports; An issue that, for the experts consulted, is considered crucial in the face of disruptions in global trade routes.
For a decade, Mexico has been recognized as one of the countries that has signed the most treaties with other countries in the world.
In addition to the USMCA and the treaties with the European Union (TLCUEM), the European Free Trade Association (EFTA), the Trans-Pacific Agreement (TPP), and the countries of Central America, trade agreements have been signed with Japan, Colombia, Chile, Peru, Panama, Israel, and Uruguay, for a total of 12 agreements with 49 countries that give it access to markets that cover more than 50% of the global Gross Domestic Product (GDP).
To this must be added dozens of Economic Complementation Agreements (ACEs) and Agreements for the Promotion and Reciprocal Protection of Investments (APRIs), which extend the scope of Mexico’s preferential trade relations to almost a hundred countries in the world. In recent months, the Ministry of Economy (SE) has also made a significant effort to close new agreements with South Korea, Ecuador and the United Kingdom .
Despite these facilities, Mexico’s trade balance remains very focused on its relationship with the United States and Canada. Of the 12 treaties currently in force, the USMCA covers 64.41% of the total value of the transactions carried out by the country abroad. Not even agreements that involve several nations, such as the TLCUEM or the TPP, exceed 10%.
|FTA||% of total foreign trade||#Countries|
“Mexico is one of the countries that has the most treaties. But what are they for? The orientation of businessmen has always been the United States […]. During the six-year term of Salinas, it was thought to create a back door with Central and South America for those businesses that could not meet the commercial requirements of the States and Canada […]. But no real attention has ever been paid to this idea,” says Jorge Molina Larrondo, professor of economics and international business at the Tec de Monterrey and consultant in public policy and risk analysis.
The waste of the treaties that Mexico has, outside of the USMCA, is also palpable in the official trade balance figures of the Bank of Mexico (Banxico). In the sum of the total value of imports and exports, the weight of North America has decreased slightly in the last two decades. However, their share has been almost untouched since 2009 and none of the other regions have absorbed those transactions. The exception is Asia, and only because of the growing trade relationship between Mexico and China, with whom there is no FTA.
“We need to diversify our markets. And one of the tools that can help us achieve this is precisely our treaties […]. The issue is that we must turn more to Europe, Asia, and Latin America, and take advantage of the agreements we have […]. We have to work on this issue, fundamentally with the large Mexican companies, so that they turn to other countries”, warns Fernando Ruiz Huarte, general director of the Mexican Business Council for Foreign Trade, Investment and Technology (Comce).
Is not a new problem. For years, specialists have claimed that adequate attention has not been paid to making the most of the treaties that Mexico has already signed. And while it is true that more consistent commercial promotion strategies are lacking, the Comce director also points out that some achievements have been made.
“Today we are talking since we are exporting, outside the United States and Canada, about 100 billion dollars (MD) [in products], which we did not do before. And we have achieved this largely thanks to the agreements”, remembers Fernando Ruiz Huarte, adding that “a good part of the base, of the total value of our transactions [has grown] thanks to these other treaties. Yes, compared to the United States, the figure does not seem so important […]. Do we have to diversify? Yes, definitely. But we have already diversified our transactions a lot because we already have a much larger volume”, he adds.
|Region||% variation in the total volume of transactions with Mexico (Imports + Exports) between 2000 and 2021|
Unfortunately, there are very specific incentives that make it difficult to diversify Mexico’s trading relationship outside of the US sphere of influence. According to Jorge Molina Larrondo, “in South America, Mexican producers have encountered many problems [to place] their exports […] nor has there been a clear idea of what we want to do there. In Central America, there are very strong security and infrastructure challenges for transportation […]. And with Europe, the great challenge is the labeling and regulation of products, more complex and ultimately different from that of the United States; That is why many employers have turned their backs on it because they see [these requirements] as a black box.”
And it is very likely that the push for nearshoring, along with the intentions to improve Mexico’s integration with the rest of North America, will make this relationship much stronger; at the same time weakening the incentives to interact with other countries.
In this context, the Comce leader points out that it is in the hands of the SE and private initiative organizations to find ways to continue strategically positioning Mexico in global supply chains with the ultimate goal of diversifying the economy and getting more out of it. the treaties. “We must be aware of what other countries in the world are asking for Mexico to send . And in this sense, […] introduce ourselves as producers of those articles”, he concludes.
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