Thursday, March 1, 2012

2011 NAFTA trade increases 14.3%

2011 NAFTA trade remained strong, increasing over 14%. Increases in automobile manufacturing, pipeline activity and in Mexican manufacturing attributed to the growth in NAFTA trade.

NAFTA trade between trade partners Canada, Mexico and US was strong throughout 2011. Overall trade by value increased 14.3% to $904.1bn. Since 2009, it has increased by 24.3%. Trade with Canada increased 14% whereas Mexican NAFTA trade increased 14.6%. The increase can be attributed to increased automobile manufacturing, pipeline activity and shifts in manufacturing to Mexico from Asia.

North American automobile production increased 10% in 2011 due to healthy US sales. As a result, NAFTA trade benefited from this increase as NAFTA trade in vehicles increased 12%. Railroads such as Kansas City Southern and Canadian National accounted for much of the movement of automobiles. Around 40% of NAFTA Canadian rail cargo and over 50% of Mexican rail cargo comprise of vehicles.

Pipeline activity also noted increases throughout 2011. Among the top five US petroleum import partners, Canada is number one and Mexico is number three. Trade via pipeline increased over 28% due in part to increased drilling and refinery activity in the US and Canada in particular.

Finally, according to a report from Maquila Reference, “Manufacturers producing goods for the U.S. market are reconsidering their manufacturing options in China, and looking at Mexico’s dual benefits of low-cost labor and reduced tariffs under various NAFTA clauses.”  Due to catastrophes such as the Japanese earthquake and tsunami along with the flooding in Thailand, manufacturers are also looking to manage their supply chain risks as well as reduce expenses such as transportation and labor by relocating facilities closer to end markets.

Mexico’s GDP is expected to rise 4% in 2011, despite the country’s problems with drug cartel violence, which hasn’t seemed to slow foreign direct investment (FDI) in new manufacturing facilities in just about all regions of the country. That’s because Mexico has a low inflation rate and debt levels, and a large population of young people available to meet employment demands of the big multinational companies.
Not only automobile manufacturers such as Nissan and Honda expanded operations in Mexico but also Foxconn, Delphi and General Electric continue to maintain a strong presence in the Mexican manufacturing space.