Mexico Trade: Gain Advantage from Low Cost

In: Business and Management

Submitted By Sallynana
Words 847
Pages 4
Liu Linna (H10001004) Paper #1
Prof. Nolt
International Economics
April 13, 2013
Mexico Trade: Gain Advantage from Low Cost
Executive Summary:
In the essay, I mainly discuss the comparative advantage of Mexico trade. After analyzing the related data and sources, I find that Mexico has the major advantage of production cost compared with its major export partners. Mexico exports more labor-intensive goods to the NAFTA members, the US and Canada, which also reflects that the economic globalization promotes the development of Mexico trade.
Background:
Mexico is the eleventh largest economy in the world, with a GDP of US$1.66 trillion in 2012. Mexico exported $336.3 billion and imported $341.9 billion last year. Mexican exports are not only raw materials such as oil or silver, but also manufactured goods and even high-technology products, including assembled aircraft, pharmaceuticals, communications equipment, and computer and office machinery, which represent 19.6% of total Mexican exports. The United States is Mexico’s largest trading partner (73.5%), followed by Canada (7.5%) and Germany (1.7%). Mexico is also one of the countries with most trade agreements in the world, having 12 free trade agreements with over 40 countries including North and Central America, the European Free Trade Area and Japan, putting more than 90% of its trade under free trade agreements.
Main Body: Mexico’s export industry is labor-intensive because it has the comparative advantage of low production cost. The cost advantage has contributed to the dramatic increase of Mexican export to the US. Although we cannot bracket the overall economic level of Mexico with the US economy together, we can still find that Mexico has higher RCA in manufacturing goods and agricultural products compared with its biggest export partner, the US. Those…...

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