U.S. manufacturing competitiveness beginning to benefit Mexico

August 30, 2012

One of the easiest ways to tell if a specific sector is doing well is to study the impact that this industry has had on its major trading partners. A recent announcement by a Mexican official helped to outline how U.S. manufacturing has helped the country's overall economy.

According to Bloomberg News, Mexico is benefiting from its close relations with "very competitive" U.S. manufacturers, as the country's Deputy Finance Minister Gerardo Rodriguez spoke to how many companies are beginning to move away from Asian firms due to rising costs.

"Many companies are shifting their production capacity back into the U.S." and adding manufacturing jobs at a "good pace," he told the news outlet. Because of the North American Free Trade Agreement, cross-border trade has led to an increase in the dealings between the two nations, and production chains have been strengthened.

"Because of these linkages with the Mexican sector, we’re being pulled somewhat by those dynamics," Rodriguez said of U.S. manufacturing firms.

These firms have grown due to rising labor costs in Asia, increased fuel prices, more efficient practices through an adoption of lean manufacturing methods and a rise in the use of technology in the sector. Mexico has noticed this change, and more trade between the countries has helped it become the largest growing economy in Latin America.

While the country is beginning to emerge as a major world player, due in part to its trade relationship with the U.S. and the strength of American manufacturing firms, the twist of fate for China has also helped Mexico.

"China has been experiencing some natural wage inflationary pressures, and at the same time they’ve had to appreciate in nominal terms their currency," Rodriguez told Bloomberg. "This is part of the global balancing, and the global balancing has operated somewhat in favor of Mexico."

Though the Chinese economy has been in the midst of a slowdown in recent months, the U.S. has managed to maintain a slow period of growth despite the economic troubles faced by many of its trading partners.

MarketWatch reported that the U.S. economy created more jobs in July than any month since February, and increases in retail sales and a high demand for skilled manufacturing positions indicate potential for further growth.