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Free Trade Por Favor
Manufacturing Flees China for Mexico, Everybody Wins

Here’s something we’d like to see more of: New manufacturing trends predict an economic win-win-win for America, Mexico, and China. Due to rising wages in China, many companies are leaving the country and moving to Mexico, according to the NYT. As a result, American trade with Mexico is up 30 percent since 2010 and direct foreign investment is higher than ever ($35 billion last year). That’s three pieces of excellent news. Wages are soaring in China, which is good for its workforce. Jobs are flooding into Mexico, which will eventually raise wages there and reduce the U.S.-Mexico wage gap driving illegal immigration. Finally, Americans can continue to buy low-priced goods at Walmart and other retailers, which helps improve our living standards here.

And that’s not all:

While in some cases a move to Mexico is tied to job cuts in the United States, economists say that the American economy benefits more from outsourcing manufacturing to Mexico than to China because neighbors tend to share more of the production. Roughly 40 percent of the parts found in Mexican imports originally came from the United States, compared with only 4 percent for Chinese imports, according to the National Bureau of Economic Research, a private research group.

The NYT piece lists a few reforms that could help clear the way for increased U.S.-Mexico trade: reducing border waiting times, stepping up bilingual education on both sides of the border, and improving Mexico’s infrastructure. We don’t always get economic news this good, and we should do what we can to keep it coming.

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  • lukelea

    “Finally, Americans can continue to buy low-priced goods at Walmart and other retailers, which helps improve our living standards here.”

    I believe the standard textbooks say the McJobs effect trumps the WalMart effect. In other words trade between low and high wage countries reduces the real wage (after factoring in changes in prices) in the high wage country. Look it up.

    • ShadrachSmith

      In thirty years unaugmented humans may very well be obsolete. But I’m still going to smile today at good news 🙂

  • Andrew Allison

    Not to mention the fact that Mexico is not in the habit of stealing the intellectual property of companies that set up shop there.

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