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Prepared for Members and Committees of Congress
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Mexico has a population of about 110 million people making it the most populous Spanish-speaking country in the world and the third most populous country in the Western Hemisphere.Based on a gross domestic product (GDP) of $1.0 trillion in 2008 (about 7% of U.S. GDP),Mexico has a free market economy with a strong export sector. Economic conditions in Mexicoare important to the United States because of the proximity of Mexico to the United States, theclose trade and investment interactions, and other social and political issues that are affected bythe economic relationship between the two countries.The United States and Mexico have strong economic ties. An important feature of the relationshipis the North American Free Trade Agreement (NAFTA), which has been in effect since 1994. Interms of total trade, Mexico is the United States’ third largest trading partner, while the UnitedStates ranks first among Mexico’s trading partners. In U.S. imports, Mexico ranks third amongU.S. trading partners, after China and Canada, while in exports Mexico ranks second, afterCanada. The United States is the largest source of foreign direct investment (FDI) in Mexico.These links are critical to many U.S. industries and border communities.In 2008, about 11% of total U.S. merchandise exports were destined for Mexico and 10% of U.S.merchandise imports came from Mexico. In the same year U.S. exports to Mexico increasedalmost 10%, while imports from Mexico increased about 3%. For Mexico, the United States is amuch more significant trading partner. About 82% of Mexico’s exports go to the United Statesand 50% of Mexico’s imports come from the United States. FDI forms another part of theeconomic relationship between the United States and Mexico. The United States is the largestsource of FDI in Mexico. U.S. FDI in Mexico totaled $91.7 billion in 2007. The overall effect of NAFTA on the U.S. economy has been relatively small, primarily because two-way trade withMexico amounts to less than three percent of U.S. GDP. Major trade issues between Mexico andthe United States have involved the access of Mexican trucks to the United States; the access of Mexican sugar and tuna to the U.S. market; and the access of U.S. sweeteners to the Mexicanmarket.Over the last decade, the economic relationship between the United States and Mexico hasstrengthened significantly. The two countries continue to cooperate on issues of mutual concern.On March 23, 2005, the leaders of the United States, Canada, and Mexico met to discuss issuesrelated to North American trade, immigration and defense. After the meeting, the three leadersannounced the Security and Prosperity Partnership of North America (SPP), an initiative that isintended to increase cooperation and information sharing in an effort to increase and enhanceprosperity in the United States, Canada, and Mexico. In April 2008, the North American leadersheld a summit to discuss how they might further advance the goals of the SPP. The three leadersdecided that their respective ministers should continue to renew and focus their work in the fiveSPP priority areas.
 
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Introduction.....................................................................................................................................1
 
U.S.-Mexico Economic Trends.......................................................................................................1
 
U.S.-Mexico Merchandise Trade..............................................................................................2
 
Mexico-U.S. Bilateral Foreign Direct Investment....................................................................6
 
Mexico’s Export-Oriented Assembly Plants.............................................................................7
 
Worker Remittances to Mexico.................................................................................................9
 
Security and Prosperity Partnership of North America...........................................................10
 
The Mexican Economy...................................................................................................................11
 
Economic Reform and the 1995 Currency Crisis.....................................................................11
 
Current Economic Conditions.................................................................................................13
 
Mexico’s Regional Free Trade Agreements............................................................................15
 
NAFTA and the U.S.-Mexico Economic Relationship.................................................................15
 
Effects on the U.S. Economy..................................................................................................16
 
Effects on the Mexican Economy...........................................................................................17
 
Major Issues in U.S.-Mexico Trade Relations...............................................................................19
 
Trucking..................................................................................................................................19
 
Other Trade Issues...................................................................................................................21
 
Policy Issues..................................................................................................................................22
 
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Figure 1. U.S. Merchandise Trade with Mexico..............................................................................4
 
Figure 2. GDP Growth Rates for the United States and Mexico...................................................13
 
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Table 1. Key Economic Indicators for Mexico and the United States.............................................3
 
Table 2. U.S. Imports from Mexico: 2002-2008.............................................................................5
 
Table 3. U.S. Exports to Mexico: 2002-2008..................................................................................5
 
Table 4. U.S.- Mexican Foreign Direct Investment Positions: 1994-2007 Historical CostBasis.............................................................................................................................................6
 
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Author Contact Information..........................................................................................................24
 
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