IBS North America
International Business Strategy

The recent United States presidential election left Mexico-U.S. relations a somewhat controversial topic. With NAFTA brought into question and the declaration that walls would soon be built to separate these two nations, the sour sentiment between these countries appears almost beyond help.

However, with U.S. exports to Mexico totaling 229,701.7 million USD in 2016, an attempt to entirely end the existing economic relationship between these two countries would be complicated, to say the least. Despite such a high value of U.S. exports to Mexico, U.S. imports from Mexico was even greater totaling 294,055.9 million USD in 2016.

This imbalance between exports and imports resulted in a trade deficit for the United States totaling 64,354.1 million USD for the year 2016. From this statistic alone it may initially appear the U.S. would, in fact, be better off without a trade agreement such as NAFTA. Such a negotiated deal encourages more trade with Mexico, perhaps enlarging this current deficit further. However, international trade agreements have many implications outside of exports and imports alone.

One additional impact trade agreements have outside of trade itself is the association such arrangements have in regards to global cooperation. Economic stability tends to correspond with political stability; therefore when two nations’ economies are closely linked together the likelihood of these countries going to war significantly decreases.

Additionally, members of trade agreements have economic relationships with other nations outside of the arrangement. Actions that affect the countries within the trade deal will ultimately have a ripple effect spilling over to other nations who share existing economic ties with those in the agreement. Taking this into consideration, it becomes easy to see how the U.S. withdrawing from the NAFTA agreement could lead to unintended effects on political relationships outside of just Mexico and Canada.

In addition to global cooperation, another potential effect of trade agreements concerns global leadership. Top nations are frequently part of several trade agreements, which ensures they have a voice in various decisions affecting world trade. For example, with the recent talk of U.S. leaving the NAFTA agreement there have been whispers of a Chinese Mexico trade deal to take its place.

Although it has not been made clear yet how serious these discussions are (Mexico’s economic secretary, Ildefonso Guajardo, will not visit China until this upcoming September) such a deal would shift society’s perceptions regarding global leadership.

Finally, trade agreements can also have a bearing upon immigration. In the case of NAFTA, Mexico has experienced positive effects regarding its economy. This increasing wealth has decreased immigration of Mexican citizens to the United States. In fact, in a study conducting by Pew Research, the past decade of immigration statistics show immigration from Mexico has sharply declined.

The majority (61%) of those who left cited family reunification as the main reason for their return as opposed to those who left due to deportation (14%). After reviewing evidence such as this, it would appear that helping Mexico maintain economic prosperity may be the best method in ensuring illegal immigration to the U.S. remains low, as opposed to other options such as building walls to separate these two nations.

Trade agreements have several implications outside of their resulting import and export data. Global cooperation, world leadership, and immigration are just a few of the effects such arrangements may impact. Moreover, trade deals help facilitate global interconnectedness which is becoming essential for our increasingly globalized society.

Deciding to turn to isolation policies as a means to combat excessively large trade deficits may work in the short term but will not be a successful way to create long term success for a nation or its consumers. Trade facilitates competition, promoting innovation and ultimately aiding in the creation of a better tomorrow.

Fonte: a cura di Exportiamo, di Morgan Caldarera, redazione@exportiamo.it

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