About 890,000 jobs in the U.S. exist due to exports to Mexico


By Bob Cook

Introduction

As the President of the United States and Congress continue to wrangle over immigration, there is significant opportunity for the importance of the US-Mexico trade relationship to get lost in the rhetoric. There are many in Congress who want to condition immigration legislation on first “securing the US-Mexico border”. How specifically would they propose to do it?

Historically, many law makers have viewed the US-Mexico border as a place to prevent bad things from happening which is manifested in such ways as the erection of imposing, impenetrable fences. I have always preferred to look for things that unite our two countries. As a result, I view the border as a meeting place—the location where two neighbors join together to engage in familial relationships, friendship, trade and job creation. The purpose of this article is to make the case for the latter.

The US-Mexico Trade Relationship

With $658.1 B in total trade in 2014, Canada is the US’ most important trade partner and will be for some time given that US-Canada trade is growing at an average of 9% per year since 2009. China ranked #2 with a total of $590.7 B in trade last year, which was mostly driven by imports ($467 B) from that country.

The volume of bilateral trade between the US and Mexico reached over $534.5 B in bilateral trade last year, marking the second consecutive year that trade surpassed over half a trillion dollars between the two countries. Mexico’s trade volume with the US that was more than double that of fourth place Japan which experienced $200.9 B in bilateral trade.

In terms of determining a country’s importance to the US, however, it is more instructive to look at exports. In 2014, US exports to Canada totaled $312 B versus Mexico at $240.3 B. US exports to Mexico, are nearly equivalent to the $244.9 B combined total exports to China, Japan and the United Kingdom – who came in third, fourth and fifth respectively last year as export destinations for America.

US exports to Mexico, however, have grown more rapidly than those to any other nation, increasing by 86.5% from 2009 to 2014. If the trend of the last five years continues, US exports to Mexico could surpass those of Canada as early as 2020. This merits that the US give greater care to its relationship with Mexico.

The Report

I began writing this report in 2007 for the purpose of informing policy makers across the nation about what trade with Mexico means to the states in which they govern. I wanted to demonstrate to policy makers everywhere that they had good reason to support initiatives that enhance US-Mexico trade. The implication is that they should have a vested interest in not only securing the southwest border, but should also support budget items that enhance trade such as improvements to our ports of entry. Following is a summary of how this trade relationship is impacting each state in the union.

State Exports to Mexico

Not surprisingly, Mexico was the top export destination for each of the four states along the US-Mexico border in 2014– Texas, California, New Mexico and Arizona. In fact—these four states accounted for slightly more than 59% of US exports to our southern neighbor.

Nonetheless, Mexico is an important export destination for many other states as well. In 2014, 31 of the 50 states exported at least $1 billion in goods and services to Mexico and Mexico ranked as the #2 trading partner for half (23) of the states not sharing a border with Mexico.

As US-Mexico trade grows – almost every state is benefitting from that growth. In fact, over the past 5 years (2009-2014) all but three (3) states –Hawaii, New Hampshire and Wyoming– have experienced growth in exports to Mexico over the last 5 years (2009-2014). During this five year period, more than two-thirds (36) of the states realized growth of at least 50% and impressively half (18) of these states experienced at least a doubling in growth of exports to Mexico. Six of the states have actually seen at least a tripling of export growth to Mexico over the past 5 years– Alabama, Louisiana, Minnesota, Montana, New Mexico, and Vermont.

Mexico Responsible for Manufacturing Jobs in Every US State

The data generated in this report, I believe, supports even further motivation to enhance the US-Mexico trade partnership. A report from the US Department of Commerce indicates that in 2014, there were 6.2 million jobs that existed in the US which were supported by exports of manufactured products. Using the methodology discussed in the last section of this article, we can estimate that more than 890,000 (14.4%) of these jobs exist due to manufactured exports to Mexico. Canada’s share of these manufacturing jobs likely represents approximately 17%.

All states benefit from this relationship with Mexico. While the four border states represent a little more than half (54%) of employment supported by manufactured exports to Mexico, still more than one-third of the states (18) had at least 10,000 such jobs in 2014.

Texas and California were the clear leaders with over 345,000 and 98,000 of those jobs respectively, but there were four (4) other states with at least 25,000 of these jobs– Arizona, Illinois, Michigan, and Ohio. The three latter-mentioned states are particularly interesting to contemplate, given that each is situated at least 900 miles from the US-Mexico border. These three Midwestern states have a combined total of almost 107,000 jobs supported by exports to our partner south of the border. All of this implies that lawmakers in the Midwestern US (as well as many other regions around the nation) should be committed to enhancing the efficient flow of commerce through our ports of entry.

Conclusion

Clearly, one of the things that unites our two countries, is manufacturing. A 2014 report by the Boston Consulting Group entitled “The Shifting Economics of Global Manufacturing” looks at changes in competitiveness factors between 2004 and 2014 for the top 25 exporting nations from around the world. Among these nations, which are responsible for over 90% of global exports, only Mexico and the United States are identified as “rising stars” in global manufacturing. Nineteen (19) of the remaining countries have experienced eroding competitiveness versus the United States, and by extension Mexico.

Specifically, the report highlights energy costs, and the stability of currency exchange rates and productivity-adjusted wages as the most important factors that are causing Mexico and the United States to be viewed favorably today as manufacturing locations. Given our relative combined strengths, there may be even more reason today to enhance our superior position in manufacturing. The data clearly shows that most states in the US should make trade with Mexico a priority.