Too Strong Competitor, Complement to NAFTA, or Potential Market?: China’s Impact on Mexican Economy

It is well known that China has emerged since the turn of the century as a promising target market for many Latin American and the Caribbean (LAC) countries, especially for some natural resource-rich South American nations. It has also been a massive investor to the LAC region for a decade. For some researchers and practitioners, China has been playing a key role for the development of their economies.

In this context, China has rather been too strong as a competitor for Mexico in the manufacturing sector not only in the home market but also in its export markets, the U.S. in particular. Mexico’s trade deficit with China climbed up to more than US$ 67 billion in 2017, while that of Latin America as a whole was at US$ 70 billion in the same year. It is also reported that a certain kind of transnational value chains constructed under NAFTA were dismantled after China had joined WTO.

This does not mean, however, that Mexico should choose NAFTA or China, but rather should seek making good use of both NAFTA and China. Mexico should find out possible ways to approach China (and other Asian countries) to strengthen what it has achieved with NAFTA, to complement what it has not attained with it, and to discover new business opportunities in these markets. China may not be a good investor for Mexico, because the recently revised NAFTA (USMCA) stipulates stricter regional content requirements and a rule that may prevent Mexico to sign a possible FTA with China (Art. 32.10). However, it can be a good potential market for those high quality, high value-added agricultural products Mexico has been exporting more and more to the United States and Canada since NAFTA took into effect in 1994. Although a totally equitable trade balance with China cannot be expected, Mexico should do everything to diversify not only its products but markets, penetrating into the Asian giant’s market.

Panel session at the 8^th International Conference, Latin American Studies Council of Asia and Oceania (CELAO), Macau, Nov. 11, 2018.