• Mexico is among the fifteen largest economies of the world and is hugely dependent on US for its exports.
• After signing the NAFTA agreement, Mexico has tried to diversify its trade to other countries/regions including Japan, Colombia, EU, Chile, Israel and Peru.
• Indo-Mexican trade has grown by 240% over the past decade to reach a record US$ 10 billion in 2018.
• However, tariff barriers are a significant constraint for bilateral trade, necessitating a trade agreement between the two countries.
Mexico is among the world’s 15 largest economies and is the second largest economy in Latin America. The country is highly dependent on the United States, its largest trading partner and destination of 80% of its exports. GDP growth in 2018 was moderate at 2.2%; small improvements of around 2.5% and 2.7% are expected in 2019 and 2020 respectively, according to IMF estimates.
Mexico’s economy is diversified, including hi-tech industries, oil production, mineral exploration and manufacturing. Agriculture accounts for 3.42% of Mexico’s GDP and employs over 12.97% of the country’s active population (World Bank). However, credit scarcity continues to harm this sector. Mexico ranks among the world’s largest producers of coffee, sugar, corn, oranges, avocados and limes. Cattle farming and fishing are also important activities in the food industry. Mexico is also the world’s fifth largest producer of beer and its second largest exporter.
After becoming a part of the NAFTA trade agreement, Mexico tried to diversify its trade to other regions and signed some FTAs and PTAs with several economies like Japan, Colombia, EU, Chile, Israel, Peru etc. Many economists and policy makers argue that the Mexican economy had to suffer due to US dominance in the eclectic framework.
One of the important repercussions, which the Mexican economy had to face was in terms of losses in jobs. Due to the amplified ease with which Mexico can import food products from the United States, Mexican farmers faced major job losses. This also hampered Mexico’s natural environment, as NAFTA compelled the country’s farmers to be more cost effective, provoking them to use more fertilisers and other chemicals.
India-Mexico trade relations
India and Mexico benefit from strong historical parallels and similar geo-climatic conditions, biodiversity, physiognomy, people, country and family values. Mexico was incidentally the first Latin American country to recognise India after independence in 1947. Indo-Mexican hybrid varieties played a critical role in India’s green revolution in the 1960s.
There has been a sharp upswing in trade between India and Mexico in the recent past. Bilateral trade grew by 240% over the past decade, and by 58% since 2016. It reached a record US$ 10 billion in 2018 as compared to US$ 2.98 billion in 2008. After a visit by Indian PM Mr Narendra Modi in 2016, the two countries decided to upgrade their bilateral relations to the level of strategic partnership. Mexico has now overtaken Brazil as India’s most important trading partner in the Latin American region. For 2018, the trade balance shifted in India’s favour, with exports at US$ 5.23 billion, growing by 4.2% yoy.
Top product categories exported by India to Mexico include motor vehicles for the transport of persons, aluminum, copper, parts & accessories of vehicles; tubes, pipes & hollow profiles; fittings, iron, steel; motorcycles & cycles; organic, inorganic, heterocycl. compounds, neuclic acids, articles of apparel, of textile fabrics, nes. India is the second largest supplier of motorcars and other transport vehicles to Mexico after the US. Some of the major brands include Volkswagen India’s ‘Vento’, General Motors ‘Beat’, Ford’s ‘Figo’ and ‘Figo Aspire’ and Maruti Suzuki ‘Ciaz’.
Top product categories imported by India from Mexico apart from petroleum and crude oils include telecommunication equipment, nes & parts, nes; automatic data processing machines, nes; steam turbines & other vapour turbin., parts, nes; parts & accessories of vehicles; organic-inorganic, heterocycl. compounds, nucl. acids; flat-rolled products of alloy steel, internal combustion piston engines, parts, n.e.s. and fixed vegetable fats & oils, crude, refined, fraction. Non-oil imports increased by 65% yoy in 2018.
Overall the tariff rates are minimal for those commodities, which Mexico imports like electrical and electronic equipment, machinery and instruments, automobiles etc. Still there is a difference in the tariff rates applied to those economies with which they have trade agreements and with India. For instance, the tariff applied on motor cars and other motor vehicles principally designed for the transport of persons is 35% for Indian exports and nil for the US. The story is similar for motorcycles, including mopeds where Mexico applies a tariff of 15%. Considering Mexico’s growing importance to India, the two sides need to enter into a mutually beneficial trade agreement at the earliest.
