By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – What happens when a communist country like China gets a taste of free enterprise? A lot. Just ask our neighbors to the south - Mexico. I'm Maxine Shapiro with KERA Marketplace Midday.
The latest issue of the Federal Reserve Bank of Dallas' Southwest economy is hot off the press. In it, economist Erwan Quintin examines the increasing competition between Mexico and China for the ever precious and abundant market share in North America. Currently, the United States accounts for nearly 90% of Mexico's exports. And three quarters of all foreign investment in Mexico comes from the U.S. Get a country the size and wealth of China who wants a piece of the action, and Mexico's got good reason to be worried.
The article reveals the Fox administration has accused China of luring investors away from Mexico. If true, that would in fact violate international trade agreements. Stories are told about trade officials along the U.S.-Mexico border, offering investors financial incentives to move their operations to China. This actually made me grin. Isn't that what every state and metropolitan area is doing to every other state and metropolitan area in the United States - funding incentives to persuade businesses to move to this state or that state? Still, when a country like Mexico is so dependent on its northern neighbors, any move out would deepen its economic woes.
But Quintin exposes that China really has nothing to do with the current weakness in Mexico's industrial sector. That started about two years ago when Mexico's exports, as he puts it, "came to a screeching halt" after enjoying a six-year expansion. Two years ago was a turning point for the world economy. In Quintin's analysis, Mexico should quit worrying about China and deal with their own structural reforms. Sure the labor market is cheaper in China, but labor costs in Mexico haven't risen in eight years. This makes me wonder what they pay their factory workers in Mexico or China. But Mexico still has a clear advantage - transportation costs remain a significant factor, as well as forty years of experience. For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m. To contact Maxine Shapiro, please send emails to mshapiro@kera.org.
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