Mexico's Reset with China
Video Transcript:
Video Transcript:
Mexican President Enrique Pena Nieto will leave China on April 8, concluding the first phase of his attempt to reset Mexico's relationship with East Asia. On the surface, Pena Nieto's agenda was focused on increasing trade and investment. However, on a deeper, more geopolitical level, Mexico is attempting to fine-tune its new relationship with Asia that has undergone substantial changes over the past three decades. It is adjusting to a world in which Mexico has significant economic partners in addition to the United States.
To help put this visit in context and to understand the future trajectory of Mexico's relationship with China, it is instructive to look at the historical evolution of their relationship.
Before the 1980s, Mexico and China had little in the way of trade or diplomatic relations. From the 1980s until 2001, the two countries were natural competitors as emerging manufacturing exporters. Trade between the two was negligible and there was little incentive to interact, much less cooperate. Since 2001, Mexico and China have begun trading with each other. This has led to cautious cooperation but also frequent tensions.
Global market forces have made it necessary for Mexico and China to establish a more comprehensive and mutually beneficial bilateral relationship. Increased trade has created occasions for collaboration, but also opportunities for friction.
Chinese investment in Mexico has been essentially non-existent up until now, but may increase in the years to come. Because China's primary domestic objective is to generate employment, it is unlikely that the country would actively promote investment in Mexico's manufacturing sector. Nevertheless, investment in infrastructure and the extractive industries is a very real possibility, especially as Mexico's new leadership begins reforming its energy and mining sectors. Additionally, China's ambassador to Mexico raised the possibility that his country would consider financing and possibly offer technology for two high-speed railways currently under consideration.
Mexico will be hesitant to open up further to China without first securing exceptions for select local industries. Mexico's large trade deficit with China, which increased from $4 billion to $51 billion over the past decade, isn't bad in and of itself because Mexico imports component parts that supply Mexico's own manufacturing sector. However, Mexico also imports domestically consumed goods such as toys, textiles and shoes that directly compete with local industry. China would like to sign a bilateral free trade agreement, but Mexico turned down an offer in January 2012 and will likely refrain from doing so in the near future.
Pena Nieto's visit is notable because it comes so early in his presidency. This emphasizes that Mexico is serious about reaching beyond North America to begin developing more mutually beneficial relationships in East Asia. With a wide array of reforms pending at home, Pena Nieto understands that this is a unique opportunity for Mexico. His visit to Asia will help lay the groundwork for a more robust international presence for a country whose history and geography has long left it in the shadow of the United States.
