“China is gaining ground as a supplier of the goods Mexico imports.” Should this trend concern us?

In my day, I was a protectionist. Almost all of us were, driven by the idea instilled in us as dogma that, in the absence of trade protection, the country would be left without a manufacturing industry. Fortunately, years later, once at the Bank of Mexico, an exceptionally talented economist began explaining to me the harms to be expected from protectionism. First, that it works like an unlegislated tax that falls on consumers in the form of higher prices and lower quality goods. In addition, protectionism leads to a suboptimal allocation of the factors of production.

The above is the doctrinal mantra that guides my opinions as an economist on matters of foreign trade. However, there are times when considerations of a different order underpin my professional opinion. At Mexico’s current juncture, the main headline in last Tuesday’s edition of El Economista read: “China is gaining ground as a supplier of the goods Mexico imports.” I wonder whether that trend is tolerable, now that this Far Eastern power has become a threat to global stability due to its aggressive and expansionist posture. It is also a threat to hemispheric stability, given Mexico’s geographic and strategic location in the North American region.

The penetration described appears to be a long-term process. Over the past decade, the share of imports from China to Mexico rose from 15.3 to 19.7 percent of the total, while the share of imports from the United States declined over the same period from 49.9 to 43.9 percent. On the one hand, this trend can perhaps be attributed to the effectiveness of the policies the Chinese government has implemented to promote its manufacturing exports. On the other hand, there is the concern this trend raises, due among other reasons to the Covid-19 pandemic, the war between Russia and Ukraine, and the trade battle between China and the United States.

If China were ever to invade Taiwan, as apparently seems to be its long-term intention, would Mexico not be vulnerable given that one fifth of its imports come from that aggressive, militaristic power? We import everything from telephones and liquid crystal displays to printed circuits from there. What should be done about it?