|
In Scotiabank's recent NAFTA Quarterly report, economists confirm Mexico is gaining strength in North American trade. And this news could be a wake-up call for Canadian small business.
Why should we care if Mexico's exports increase? What does this mean to Canadian businesses that rely on exports to the US?
It's a question of simple competition. Mexico, with their attractive prices for exports that are often a result of lower labour costs, could pose a threat to Canadian companies vying for the same American customers. According to Adrienne Warren, Senior Economist, Scotiabank, Mexico stands a chance to capture a larger share of the U.S. market. And this could spell a decrease in Canadian exports.
Pablo Bréard, Vice-President, International Research, Scotiabank. says, "The outlook for the Mexican economy remains quite favourable. Confidence in Mexico's prospects is underscored by the significant increase in foreign capital inflows attracted by the fundamental policy reforms which have lowered inflation, interest rates and external debt levels."
Throughout the 1990s Canada maintained a stable 19% share of U.S. imports enjoying a position as the United States' chief trading partner. Today though, Mexico's share has almost doubled to 11%. And experts claim that should the current trends persist, within a decade Mexico could surpass Canada as the United States' largest trading partner.
| | Report Facts
1990-2000 World trade volumes rose at an average annual rate of 6 1/2% - more than three times the increase in global production.
Trade as a share of world GDP rose to a record 20% in 2000, an increase of more than five percentage points since the mid-1980s.
In 1999 Canada moved up to 6th place in world value of its exports. Of the top 10 ranked countries, Canada witnessed the fastest rate of export growth.
Merchandise exports were 40% of Canada's GDP in 2000, almost double the G7 average and well above comparable figures for Mexico or the United States. |
Changes in Trade Patterns
Significant changes mark the pattern of trade within the region. Characteristic of North American trade is a rapid increase in two-way exchanges of similar products. This type of trade lets firms exploit economies of scale, specialize production, and build upon traditional commodity strengths. Producers of office and telecommunications equipment and automotive products have been able to benefit from this kind of trade. But the economists predict that looming protectionist sentiments and trade frictions pose challenges for all three NAFTA countries. In boom times, trading partners rarely feel these economic pressures, but in periods of slowing economic growth, trade could slow as well.
Overall though, the report paints a positive picture for trade within North America. It predicts continuing growth, the natural consequence of globalization as well as concerted trade liberalization efforts within the region.
**********
Source: NAFTA Quarterly, published by Scotia Economics. This report also provides an overview and detailed economic and financial outlook for the each of the three NAFTA nations and highlights the cyclical impact of the U.S. slowdown on the region.
NAFTA Quarterly and other Scotia Economics publications are available on www.scotiabank.com.
Linda Plater is a freelance writer in Toronto, Ontario.
|
