Journal of Global Economics

Mexico’s Dual Trade With its Two Main Partners: Integration vs. Approximation

Abstract

Roberto Gutiérrez-Rodríguez

Trade and foreign direct investment (FDI) relations of Mexico with its two major trading partners, the United States of America (USA) and China are addressed. The link with USA dates centuries back; nowadays its reference is the North American Free Trade Agreement (NAFTA), put into operation in 1994. The bilateral Grubel and Lloyd Index (GLI) shows high levels, due to the integration of many industries along both sides of the border. Besides, the trade generates a substantial surplus for the country, combined with important FDI inflows. Relations with China resurfaced after the commissioning of NAFTA (as with other Asian countries interested in approaching the world's largest market and also sell in Mexico’s). They are characterized by an excessive unbalance: for every 100 dollars Mexico imports from that country it only manages to export nine, and Chinese FDI in the country is marginal. The bilateral GLI is low, but it has been growing steadily. Although the possibilities of further collaboration seem enormous, in the absence of a comprehensive trade agreement they remain attached to the guidelines of the World Trade Organization (WTO).