Chinese President Xi Jinping visits Mexico this week as part of the leader’s four-country visit to the Americas. Official Chinese news outlet Xinhua reports bilateral relations “have enjoyed sound development since the two countries established diplomatic ties 41 years ago.” But a look back at Sino-Mexican relations shows a path not without its share of potholes, worsened by Mexico’s growing trade deficit with China, among other reasons. Now six months in office, Mexican President Enrique Peña Nieto is taking steps to warm up the relationship. With new leaders in both countries—Peña Nieto’s December 2012 inauguration took place within a month of Xi’s ascension as head of the Communist Party—Beijing appears receptive to Mexico’s advances, especially given the possibility of a Mexican energy reform.
The past few years saw some diplomatic bumps while the last two presidents of each respective country were in power. China took offense in 2011 when then-President Felipe Calderón hosted the Dalai Lama. Before that, in 2009, Mexico was none too pleased when China decided to quarantine more than 70 apparently healthy Mexican tourists over a swine flu scare.
However, trade stands as a bigger bilateral sticking point, particularly for Mexico. When China went after a unanimous vote to gain accession to the World Trade Organization (WTO) back in 2001, Mexico stood as the last obstacle. The two countries came to an agreement that gave China the WTO membership it wanted while allowing Mexico to maintain countervailing duties—slated to expire in 2007 but extended through 2011—on a host of Chinese products.
Regardless of those “grace period” tariffs, and others Mexico has levied in an attempt to stave off a flood of Chinese goods, the Latin American country’s trade deficit with China yawned wide open over the course of a decade. The deficit rose from $8 billion in 2003 to $51 billion last year, according to the Mexican Economy Secretariat. Even on trade figures the two countries have differed, with China placing its 2012 exports to Mexico at $37 billion while Mexico puts the figure closer to $57 billion. Meanwhile, China dislodged Mexico as the second-biggest U.S. trading partner in 2007.
But changes are afoot. Some observers say rising labor costs in China, coupled with that country’s geographic distance from the United States, give Mexico a new leg up in competition for the U.S. market. Mexican daily El Universal makes the case that “elevated potential” exists for bilateral investment. “Mexico needs to get over its obsession with the trade deficit, a number that fails to capture the complexity of the countries’ commercial relationship and obscures opportunities for positive-sum cooperation,” writes Theodore Kahn for The Diplomat’s China Power blog.
New governments could also signal a “new stage” in Chinese-Mexican ties, as the Mexican leader’s website heralds in official communication about the Chinese leader’s visit. Peña Nieto visited Xi in China in April, and the latter’s June 4-6 stop in Mexico comes a few quick weeks later. Ahead of his trip, Xi sought to address Mexican concerns on the trade deficit, saying China “is ready to join in efforts with the Mexican side to tap into potential, expand the scale and optimize the structure of bilateral trade and seek balance of trade in an active way.”
One way that could occur would be if a promised energy reform, included in the ambitious Pacto por México reform package, opens up the country’s hydrocarbon sector to foreign investment. Such a move could help feed China’s commodity hunger and build on Mexico’s growing oil exports to China; during Peña Nieto’s April visit to China, it was revealed that Mexico would increase oil exports to China by 30,000 barrels per day.
Xi’s trip also included visits to Trinidad and Tobago and Costa Rica before the one to Mexico, and will conclude with a stop to the United States.