New moves to strengthen The U.S.-Mexico paRtnership NAFTA is at the center of Mexico’s free trade network
Latin America’s largest economy is increasingly viewed as a key member of the North American market by companies around the world

TRADE between Mexico and the United States has risen rapidly and now totals an average of more than $1.7 billion a day

Foreign trade is the lifeblood of the Mexican economy, accounting for almost 70 percent of gross domestic product. Around 65-70 percent of it is with the United States, and business between the two nations is valued at more than $1.7 billion a day.

Over the past decade, Mexico has consolidated its position as the U.S.’s second largest trading partner. U.S. trade with Mexico has grown faster than with any other major commercial ally. Mexican exports to the United States have increased twice as fast as those from the rest of the world, with the result that Mexico’s share of total U.S. imports has doubled to 12 percent.

The cornerstone of the economic integration of Mexico and the United States has been the North Atlantic Free Trade Agreement (NAFTA), which removed restrictions on the flow of goods, services and investment between Mexico, the United States, and Canada.

Luis Ernesto Derbez Secretary of Foreign Affairs

Mexico has benefited from NAFTA in terms of trade, economic growth, and job creation. “Companies across the world increasingly view Mexico as part of the North American market,” says Luis Ernesto Derbez, Secretary of Foreign Affairs, formerly Secretary of the Economy.

The Mexican economy has been transformed from a relatively closed climate for investment to one of the world’s most open and dynamic business environments. A firm commitment to economic liberalization has led to an overhaul of Mexico’s trade, investment, and financial policies to establish macroeconomic stability and the basis for long-term sustainable development.

NAFTA, in operation since January 1994, is the centerpiece of a network of free trade agreements through which Mexico has blended itself into the world economy over the past decade. These range from agreements with individual Latin American nations to deals with the European Union, the European Fair Trade Association (EFTA), and Israel.

Mexico is an active member of the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation forum (APEC), and the Organization for Economic Cooperation and Development. This year it will host the fifth WTO ministerial meeting in Cancun. It is also hosting the final stage of the negotiating process for the Free Trade Area of the Americas (FTAA), which runs until 2005.

President Vincente Fox has pledged to make Mexico “a bridge between regions and visions of the world.”
Foreign Secretary Derbez, who was given the role by President Fox earlier this year following his success at the Department of Economy, regards diplomacy as a platform to promote and fortify Mexico’s socio-economic development. “There is coherence in what we are doing between the foreign affairs department and our commercial policy. Diplomatically and commercially, there is a common vision.”

The development of Mexico’s relationship with the United States is central to this policy. “We have to continue to work to make it stronger and better for both nations,” says Dr. Derbez.

In a recent speech to the U.S. foreign policy think-tank, the Center for Strategic and International Studies in Washington, he highlighted the fight against terrorism as the number one priority in the relationship between Mexico and the United States. “We have been working on that ever since September 11 and we will continue to work on it,” he said.

Dr. Derbez also committed to working toward reaching a migration accord with the United States, and toward encouraging job creation to reduce the numbers seeking employment across the border.

Regarding NAFTA, the Foreign Secretary says, “There should be no doubt in anybody’s mind that NAFTA has been a positive and helpful influence for both the United States and Mexico, and this is an important part of the bilateral relationship that has to be strengthened and given more force in the coming years.”

Mexico is equally committed to the success of the Free Trade Agreement of the Americas. “If implemented, it will open the entire hemisphere to us,” says Dr. Derbez. “Strategies like this one will help us grow quickly if markets are genuinely opened further.”

Since NAFTA has been in operation, Mexico has more than tripled the average annual amount it receives in foreign direct investment to almost $14 billion. Mexico’s largest source of FDI is the United States, which provides approximately 70 percent.

Most areas of the Mexican economy are open to FDI. Leading U.S. companies such as Procter & Gamble, Sara Lee and Frito-Lay have poured more than $2 billion into the Mexican food industry, for example.

Tourism is another important sector in which FDI is welcome. Mexico’s third largest foreign currency earner, it accounts for 9 percent of total GDP, and U.S. tourists comprise 80 percent of all foreign travelers to Mexico.
Foreign investment in the energy sector is limited by the Mexican Constitution, but the government is preparing to open up the energy generation and distribution sectors over the next ten years.