Foreign trade, as reflected by the indicators, has not stopped operating even in times of pandemic. However, the protectionist message, using the pandemic to gain followers, is gaining more and more weight.
On numerous occasions, at Economipedia we have debated the importance of foreign trade for boosting economies, as well as the close relationship, manifested in numerous studies, between economic growth and the opening of countries to the outside world. However, with the pandemic, the public debate shows a new debate that, for the orthodox, was, or so it was believed, more than closed. A debate that, given what the pandemic has meant, has reopened the protectionist wishes of many leaders, who had been threatening the closure of their countries and who have used the pandemic to apply those protectionist policies that they so longed for.
And it is that, in the face of the severe shock, both in supply and in demand, that the pandemic supposed, the impossibility of continuing to develop any economic activity due to the social distancing measures that were applied supposed a forced stoppage of commercial activity throughout the planet . In a matter of weeks, all the traffic of goods and services that circulated around the planet suffered a drastic stoppage that ended with the breakdown of the different value chains that operate on our planet. And it is that, taking into account that China is the first link in the chain, being the main producer of manufactures in the world, the inability to import the merchandise led to a shortage that ended up causing the displeasure of many rulers.
This situation, despite the fact that it was a situation that had occurred as a natural phenomenon, led these leaders, among whom Donald Trump stands out, to sing messages that sounded very familiar to many of us. Messages that, like those issued last year, included the protectionist spirit of the different leaders who previously tried to block this phenomenon. However, making use of the pandemic and implementing the message, protectionism, at a time when China had many enmity due to the belief that it had spread the pandemic throughout the world, has had a great impact on society.
Well, in the face of the situation that arises, society, fearful that this situation will be repeated more frequently, has “bought” the message of the supporters of the tariffs, in order to avoid that a new situation of shortage could occur in the country. However, leaving aside all the contribution that, in years of history, trade has made to our economy. A contribution that, as I said, is not only collected in the main papers that address this issue, but is also collected in indicators that, in the same way that they highlight the weakness of certain sectors in situations like the one that happens to us today, highlight the strength of a sector that, like foreign trade, continues to grow at home, deteriorated, but constant.
Mexico: the example to follow
At a time like the current one, where the Mexican economy had come from reaping a severe stagnation at the end of last year, the arrival of agreements such as the one reached with the United States and Canada, the T-MEC (former NAFTA), supposed a breath of air fresh, as well as relief, for an economy that, previously, was not going through the best of its situations. And, in this sense, the agreement reached, taking into account what this entailed, as well as the discrepancies with Donald Trump, became the main tool that Mexico would later have to combat the pandemic.
To get an idea of what we are talking about, foreign trade represents for Mexico neither more nor less than 80% of its gross domestic product (GDP). Last year, only the country’s exports supported 40% of the Mexican GDP; some data that makes it easy to get an idea of the great potential that this sector represents for the economic growth of the country, being a clear economic engine. Since, when one stops to observe the behavior of Mexico in international markets, as well as the evolution shown by the participation of the Aztec country in these markets, it can be seen that the sector has not allowed to increase its weight in the economy. In this sense, going from 17%, this being the weight of the foreign sector in GDP in 1970, to the weight that, with 80%, this sector represents today.
And it is that, if we go back to the year 1994, with the entry into force of NAFTA, trade between Mexico and the two trading partners that appear in said agreement grew considerably. So much so that, from 1994 to the end of 2018, the volume of commercialization between Mexico and the United States went from 82 billion dollars to 612 billion dollars, an increase of 646%, while exchanges between Mexico and Canada increased 808% during the same period of time.
In this sense, with the data in hand, we see that NAFTA was, and is, the main engine of Mexican exports. Some exports that, if we break them down and classify them by destination, focusing on those sent to the United States, support 31.2% of the country’s GDP. Taking into account that the weight of total exports in the GDP of 39%, that the United States supports 31% reflects the weight of this economic power in Mexico’s relations.
In line with what has been commented, it should be said that this situation would not have been possible without certain events that favorably favored the Aztec country. Well, the trade war that was opening between China and the United States left a free place for Mexico for the United States to find its main commercial partner. An event that, in addition to occurring, brought with it a strong increase in merchandise traffic with the United States, which is very remarkable.
A growth that, it should be noted, has not been harmed even in times of pandemic, having to say that, thanks to the agreement and that strategic position of Mexico, exports between January and August of this year were located at 202,950 million dollars, which is which represented a fall of 15.7%, compared to the same period of the previous year. However, taking into account, as we said, that we are talking about a smaller drop than the one that occurred in 2008, the year in which these fell by 26.7% in the annual rate.
That is why, incidentally, that this situation has led the country to record a historical surplus of $ 68.42 billion.
In short, and in line with the conclusions drawn by the main trade reports, foreign trade is not only a way of growth for the countries, but it is also the way that the different economies should rely on in order to , along with other sectors, get out of the quagmire in which they find themselves. The data for Mexico speak for themselves; demonstrating that, despite the pandemic, the country has continued to lead as the main trading partner of the world’s leading economic power. However, regardless of science, the pandemic continues to endanger the phenomenon of globalization, threatening a withdrawal of value chains. Actions that, precisely, will not favor this long-awaited recovery.