Made In Mexico…With Mostly American Parts (and vice versa)
October 13th, 2017
Former Mexican Ambassador to the United States Arturo Srukhan once said, “For every dollar that Mexico earns from exports, 50 cents are spent on American goods.” It turns out this is pretty accurate. A study by the U.S. National Bureau of Economic Research found that goods imported from Canada contain 25 percent U.S. inputs and goods imported from Mexico consist of 40 percent value added from the United States itself.
When most consumers buy a product imported from another country, they don’t usually think about its origins short of the “Made in…” tag or sticker attached. But the world of manufacturing isn’t as cut and dry as it may seem. A gadget made in Mexico is a product of Mexico, but in our highly-integrated world, there are often a number of countries that are instrumental in each product’s creation. It is especially important to understand these relationships when examining trade agreements such as the North American Free Trade Agreement. By understanding the complex level of international cooperation that goes into the manufacturing industry, we can more clearly see the benefits of free trade with our neighbors to the north and the south.
Economic integration under NAFTA has dramatically increased the level of transnational cooperation between manufacturers which has bolstered North America’s competitiveness in the global market. For example, according to the U.S. Chamber of Commerce, cars being assembled in the Great Lakes region commonly cross the border between the U.S. and Canada up to half a dozen times during manufacturing. Through this cross border collaboration, American exports of automobiles increased 89% between 2009 and 2014. In fact, American automobile manufacturers topped a record 2 million cars exported in 2014. This milestone in American manufacturing was made possible by efficiencies created via the North American Free Trade Agreement.
Mexico also plays a vital role in supporting America’s exports industry. According to the Peterson Institute for International Economics, approximately 14 percent of U.S. merchandise exports in 2013 went to Mexico. To put this to scale, in 2013, the United States exported more merchandise to Mexico than the combined total to Germany, France, the U.K., and the Netherlands.
NAFTA enables the United States, Canada, and Mexico thrive amongst global competition in ways that would not be possible without economic integration and close manufacturing cooperation. By building supply chains that cross national borders, North American manufacturers have found success in a globalized world that requires increased transnational collaboration.