In recent years, Mexico has become a leader in global manufacturing. While some argue that manufacturing in Mexico depletes jobs from U.S. workers and hurts the economy, the exact opposite is true. Instead, the North American Free Trade Agreement and the growth of manufacturing activity in Mexico that has resulted has had tremendous benefits for the highly integrated North American economy, including the U.S.
The U.S. Chamber of Commerce recently released a report, "NAFTA Triumphant," which noted annual trade with Canada and Mexico has reached $1.3 trillion, which is four times greater than annual trade before the agreement was passed in 1994. As Mexico produces more cars and other manufactured goods, trade with the U.S. will increase, and the economic benefits will be felt across North America.
The benefits of a prosperous Mexico
One key indicator of how manufacturing in Mexico benefits the U.S. is the rise of the country's middle class. As more Mexican citizens obtain higher buying power, U.S. companies will have access to another high-demand market just south of the border.
Take a look at the Southwest, for example. As Sapna Gupta wrote for SFGATE, Mexico is Arizona's largest trade partner, with total trading having reached $15.9 billion in 2014 alone. Gupta explained that as Mexico's economy and middle class continue to grow as a result of manufacturing, the opportunities for the Southwest will stretch far beyond increased trade of physical goods. In addition to this benefit, Mexico's economic health will empower the country to invest in education, infrastructure and development, all of which will spark advantageous partnerships with southwestern businesses and economies.
Pamela Starr also wrote for SFGATE, emphasizing that the U.S. stands to benefits from its deep economic ties with an increasingly prosperous Mexico. For example, Starr pointed out that growing exports and shared production with the Southwest will translate to the creation of new jobs for U.S. citizens.
Considering supply chains
It is also important to keep in mind that due to Mexico's close proximity to the U.S., increased manufacturing activity there means heightened demand for supply chain logistics. According to World Property Journal, manufacturing in Mexico will have a long-term effect on the U.S. distribution and logistics business. More specifically, considering more than 70 percent of Mexican auto production is exported to the U.S., markets in the southern states, Texas and the Midwest will benefit from auto distribution demand.
Manufacturing in Mexico has financial benefits for both businesses and the the economies of North America. Expanding to Mexico is a wise strategic decision. Companies that are interested in moving forward should take a look at The Offshore Group infographic, "10 Steps for Establishing your Manufacturing Presence in Mexico."
The Offshore Group: You Manufacture ... We Do The Rest.