Globalisation, free trade and protection — practice question

Forecasts suggest that Mexico will rank among the world’s ten largest economies by 2020. The country’s industrial structure has been changing for a long 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. Over recent years, Mexico has been dismantling trade protection policies such as tariffs and quotas. It now has free trade with more than 40 other countries. International trade is central to the Mexican economy, with one third of output exported and imports making up more than a third of the goods bought in Mexico. Nearly 80% of Mexico’s exports are sent to the United States of America (US). Mexican firms can choose from many sources of imported raw materials and also have a large international market in which to sell their products. The main destination for Mexico’s shrinking number of emigrants is the US. Following an economic downturn in 2009, the Mexican economy has expanded. Incomes have increased and life expectancy has risen. Table 1 shows income levels and life expectancy for several 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. Unlike its neighbour the US, unemployment has been falling in Mexico. Production costs in Mexico are rising more slowly than in China. Mexico imports goods from China and also competes with China in several export markets. Some of Mexico’s leading exporting firms are monopolies inside the country. One example is Pemex, the state-owned oil and gas monopoly. The firm sells oil worldwide. Some economists argue that Mexican consumers would gain if Pemex were sold to the private sector.