1942: the US enters WWII and the US Bracero Program invites and regulates Mexican males to the United States to work on rail and other critical projects suffering labor shortages due tot he war
1961 and 1965: as the Bracero Program winds down, the Mexican government’s border industrialization and maquiladora programs are established and in effect til they were replaced by NAFTA and IMMEX
1986: Mexico began positioning itself as a global player first with entry into GATT
1994: the ratification of NAFTA
The above events set the stage for Mexico to become a manufacturing powerhouse of North American supply chains. As states in the US with strong manufacturing bases, including North Carolina, remember, these developments in North American trade history were considered damaging to some local US economies.
Especially after GATT and NAFTA, the increased legitimacy of Mexican exports in regional and global trade meant that its “cheap labor” could and did entice a flow of manufacturing operations owners in the US to substitute those out for operations south of the border. Notable industries affected were textiles and appliance production.
Mexico continues to enjoy ever-growing US investment in its manufacturing operations, but its post-NAFTA potential hit a bit of a wall just 7 years after NAFTA.
2001: China enters the World Trade Organization.
With China, now able like Mexico to participate in US and global trade with Most Favored Nation treatment of its products, the world suddenly had a manufacturing partner that was not only low-cost and talented. This new partner also happened to be one of the most populous markets in the world, with rapidly growing consumer and industrial demand.
2006: US trade with China surpasses US trade with Mexico, with China outranking Mexico as US trade partner for the next 12 years
2009: Wages in China surpass wages in Mexico for comparable manufacturing jobs
While the production efficiencies China offered were due to its subsidies in energy supply, heavy focus on technology transfer and its centrally planned workforce organization, from the years 2002-2009, these factors were perhaps easily oversimplified in the eyes of most North American witnesses as “lower costs of labor.” By 2009, however, manufacturing salaries in China on average were were similar or better than comparable salaries in Mexico.
2010: China becomes the 2nd-largest market in the world
2018: US imposes “Section 301” tariffs targeting solar panels and appliances produced in China
2019: Mexico overtakes China in its total trade volume with the US
2020-2021: Covid causes mass shutdowns in Mexico and the US
2021-2022: Covid causes mass shutdowns in China
2022: Russia invades Ukraine
2023: US extends Section 301 tariffs
When a global pandemic shut down especially China’s ports and many production operations, hopes in Mexico for shifting production investment onshore began to gain traction. With the pandemic issues, obstacles to trade with China, such as penalties initiated by the US, began to seem less political and more structural. Then investors producing in Europe also began looking at Mexico, after rising energy costs and other problems there intensified in conjunction with Russia’s invasion of Ukraine.