Trade with Mexico is key to U.S. economic rebound, experts say

RIO DE JANEIRO, BRAZIL – The Covid-19 pandemic has severely impacted the commercial value chains between Mexico and the United States, which is why strengthening them is essential for Mexico’s economic reactivation, as agreed by both nations during an online meeting between their presidents this week, experts agreed.

According to official data, bilateral trade between Mexico and the United States, that is, the sum of exports and imports, stood at US$506 billion in 2020, a figure 13% lower than the US$576 billion posted in 2019.

This means that the trade relationship between the two nations has deteriorated as a result of the economic impact of the pandemic and its effects on the value chains connecting the two countries’ industries.

According to Carlos Bautista, a trade specialist at La Salle University, in the new post-pandemic scenario, Mexico plays a key role in the economic growth of the United States, which is why the US is interested in reactivating its economy by strengthening the value chains that link the two countries.

According to data from the US Census Bureau, Mexico is the United States’ second largest trading partner, behind only China, with which it recorded an exchange of goods and services amounting to US$560 billion in 2020.

Given the commercial significance of Mexico for the United States, during last Monday’s bilateral virtual meeting between Presidents Andrés Manuel López Obrador and Joe Biden, “strengthening the resilience and security of binational value chains” was agreed, and therefore the high-level economic dialogue will be resumed.

According to government information, manufacturing value chains have been among the most severely impacted.

Warning on energy

While strengthening the value chain is important, Bautista said that another significant point to consider in the trade relationship with the US is trust, which has been recently undermined, and could deteriorate with the reform of the Electricity Industry Law.

The above law, he said, is susceptible to challenge under the US-Canada-Mexico trade agreement dispute resolution mechanisms, or using the multilateral World Trade Organization or through international arbitration.

However, the trade specialist believes that the fact that there has been a rapprochement between the governments paves the way for a dialogue to prevent this type of conflict.

Source: La Jornada