Globalisation, free trade and protection — practice question

It has been forecast that Mexico will be among the world’s top ten economies by 2020. The country’s industrial make-up has been changing for some time. In 2008, 12% of the labour force were employed in the primary sector (mainly agriculture), 26% in the secondary sector (mainly manufacturing) and 62% in the tertiary sector (services). By 2012, employment had dropped by 1% in the primary sector and by 2% in the secondary sector. During recent years, Mexico has been removing trade protection measures such as tariffs and quotas. The country now has free trade with more than 40 other countries. International trade has a major role in the Mexican economy, with a third of its output being exported and imports accounting for more than a third of the products bought in Mexico. Nearly 80% of Mexico’s exports go to the United States of America (US). Mexican firms have a wide range of sources for imported raw materials and a large international market in which to sell their products. The main destination for Mexico’s shrinking number of emigrants is the US. After an economic downturn in 2009, the Mexican economy has been expanding. Incomes have increased and life expectancy has risen. Table 1 shows the income levels and life expectancy for a number of countries. Although the standard of Mexico’s education is not very high, poverty is falling in the country as living standards rise. More people now have access to better-quality health care. In contrast to its neighbour the US, unemployment has been falling in Mexico. Costs of production in Mexico are rising more slowly than in China. Mexico imports products from China and also competes with China in a number of export markets. Some of Mexico’s leading exporting firms are monopolies within the country. One is Pemex, the state-owned oil and gas monopoly. The firm sells oil throughout the world. Some economists argue that Mexican consumers would gain if Pemex were sold to the private sector.