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Mexico’s free trade agreements have been a crucial factor in driving its export manufacturing success. Manufacturers seeking to capitalize on the country’s lower labor costs while still exporting to international markets have a lot of options in Mexico. With a strategic location, a highly skilled workforce, and a range of trade agreements, Mexico has become an attractive destination for companies looking to set up low-cost manufacturing operations for foreign markets.
Mexico has signed free trade agreements (FTAs) with over 50 countries, making it one of the world’s most open economies. Indeed, Mexico is a world leader in international trade. Their multilateral agreements provide companies with preferential access to a range of markets, including the United States, Canada, Europe, and Asia.
One of the most significant agreements is the United States-Mexico-Canada Agreement (USMCA), which began as the North American Free Trade Agreement (NAFTA), signed by Mexico, the United States, and Canada in 1994. NAFTA was a game-changer for Mexico, creating a massive market of over 470 million consumers and providing access to an abundance of raw materials, components, and technology.
Since the implementation of NAFTA/USMCA, Mexico has transformed itself into a global manufacturing powerhouse, with exports reaching $400 billion in 2020. Mexican free trade agreements have been a crucial factor in attracting foreign investment and boosting exports.
The USMCA, ratified in 2020, builds on NAFTA’s successes, promoting closer cooperation between the three countries in a range of areas, including labor rights, environmental protection, and digital trade. The agreement also includes new provisions on intellectual property rights, providing greater protection for innovation and creativity.
Mexico is now the leading trade partner for the US, bumping China in 2022 to #3. That year, Mexican exports to the US rose 19% to $33 billion USD, imports from the US rose 13% to $23.7 billion, and total US-Mexico trade rose 16% year-over-year to $56.25 billion.
Mexican free trade agreements extend beyond North America, with the country signing a range of agreements with other regions and countries. Mexico has also signed trade agreements with the European Union, Japan, and many Latin American countries, providing companies with a range of export opportunities. These agreements have played a crucial role in promoting economic growth and job creation in Mexico, as well as driving innovation and competitiveness.
Mexico’s leadership in free trade agreements has been recognized globally, with the country being invited to join the Trans-Pacific Partnership (TPP) negotiations in 2012. Although the United States withdrew from the TPP in 2017, the remaining 11 countries (including Mexico) signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018.
The CPTPP is a landmark trade agreement that promotes free trade and economic integration between countries in the Asia-Pacific region. The agreement covers a range of areas, including intellectual property, e-commerce, and labor standards, and is expected to boost trade and investment between its members.
Mexico has preferential trade access to 60% of the world’s gross domestic product via trade partners around the globe. These partnerships are formed by 15 strategic free trade agreements:
Mexico’s free trade agreements also provide companies with a range of benefits, including:
In general, countries engage in trade with each other under a system of consistent tariffs on imported goods. This enables the respective governments to levy taxes at customs, leading to higher prices for consumers within their own borders. To avoid or lessen the impact of such fees and taxes, nations can pursue a free trade agreement which establishes guidelines and conditions for reducing or eliminating such trade barriers. Mexico has aggressively pursued FTAs as an effective means to greatly minimize or even eliminate tariffs, quotas, subsidies, and prohibitions for many of the world’s major consumer markets.
In fact, Mexico’s free trade agreements have been a critical factor in driving its export manufacturing success. With a range of agreements with countries around the world, Mexico provides companies with preferential access to key markets, making it an attractive destination for investment and production.
The country’s commitment to free trade has also helped to promote economic growth, innovation, and job creation, making it a model for other countries seeking to boost their competitiveness in the global economy.