The State of Mexico's International Trade Essay

The State of Mexico's International Trade - Essay Example Some of these prominent FTA's are the North American Free Trade Agreement (NAFTA), with the United States and Canada (1994), Colombia and Venezuela (G-3, 1995), the European Union (2000), Iceland, Norway, Liechtenstein, and Switzerland (EFTA, 2001) and Guatemala, Honduras, and El Salvador (North Triangle, 2001). FTA's have helped Mexico increase its international trade with countries around the world. They have also aided in reducing the effects of the untimely and unpredictable economic crisis such as crashing prices of oil, recession in the global economies and so on. Today Mexico stands at the seventh position in the list of leading trading nations in the world owing to its free trade policies. Mexico contributes to 46 percent of the Latin America's exports and 47 percent of its imports. NAFTA proved to be a major step in attracting foreign direct investments in the country. Foreign capital has increased the employment rates and the output in the country. Earlier Mexico relied on oil for its exports while at present times the manufactured goods compose the major section of export. All these steps have lead to the significant overall economic development of all the parts of the country (Derbez ""Beyond NAFTA -- Mexico and the Free Trade Area of the Americas," by Luis Ernesto Derbez, Secretary of the Economy, Mexico -- "The Free Trade Area of the Americas" -- U.S. Department of State, October 2002"). The biggest trading partners of Mexico are USA and Canada. Table 1 (Davy and Meyers, "United States-Canada-Mexico Fact Sheet on Trade and Migration"). Table 1 shows the export and import statistics of different NAFTA partners in 2003. The major trade partners of Mexico are US and Canada. USA holds a major share in Mexican export sector. Mexico sends 88% of its exports to US. Chart 1 demonstrates the trade among the three countries: US, Mexico and Canada. Mexico-US trade accounted for $286 billion in 2004. Canada and US are the most important contributors to the Foreign Direct investment in Mexico. 40% of the total FDI to Mexico comes from USA. In 2004 this amount was around $7.3 billion from USA. Canada comes at fourth place in the major FDI contributors to Mexico listing. Canada accounted for $379.2 million FDI in 2004 (Davy and Meyers, "United States-Canada-Mexico Fact Sheet on Trade and Migration"). On the other hand Mexico serves as third largest source of oil imports to US as shown in Fig.1 ("Mexico Energy Data, Statistics and Analysis - Oil, Gas, Electricity, Coal"). Chart 1 (Davy and Meyers, "United States-Canada-Mexico Fact Sheet on Trade and Migration"). Fig.1 ("Mexico Energy Data, Statistics and Analysis - Oil, Gas, Electricity, Coal"). Mexico has a strong existence in the international agro-food market owing to its different products like agriculture, forestry, livestock, hunting, fishing, foods, beverages and tobacco. Mexico exported worth $11.8 billion in 2005 and imported worth $14.3 billion in the same year. 65% of Mexico's imports come from USA ("RS/USDA Briefing Room - Mexico: Trade"). Chart 2 ("RS/USDA Briefing Room - Mexico: Trade"). Mexico recorded an annual GDP growth rate of 4.8% in 2006. It increased from 0.8% to 2.8% in three years from 2002 from 2005. The total trade of Mexico showed a significant increase to 60.3 per cent of GDP from earlier