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EDS International has an extensive global network and expertise in Asia, Europe and the Americas. We can find and assess your ideal manufacturer, support your production transition or provide scalable, end-to-end supply chain solutions. Read more about the countries where we provide these solutions below.
Mexico has an export-driven economy. After the North American Free Trade Agreement (NAFTA) took effect on January 1, 1994, tariffs on more than half of exports from Mexico to the US were lifted.
Mexico’s global exports increased by 6.7% year-on-year to a record high of USD 41,825.44 million in May 2019. Non-oil exports added 7.7% on the back of higher sales of manufacturing (8%), namely automotive products (16%), industrial machinery & equipment (11.9%), food, alcoholic & beverages (10.7%), and professional & scientific equipment (5.7%).
Specific to the US, there was a rise of 8.5% in non-oil exports, mostly due to stronger auto sales (19.8%). The US is Mexico's biggest trading partner. Currently, the US buys 80% of what Mexico exports compared to just 3% and 1% to Canada and China respectively. Mexico is now a major center for electronics. That includes most of the flat-screen TVs sold in the US. It also makes medical devices and aerospace parts.
International trade, which is exports plus imports, makes up 77% of the country's GDP. That is much higher than Brazil’s 23% or even China’s 48%. The emphasis on trade makes Mexico's companies globally competitive. Gruma is the world's largest tortilla maker. Bimbo is the largest bread maker since it acquired US baker Sara Lee. Mexico’s geographical proximity gives its companies direct access to the US market. They also share a common language with the rest of Latin America.
Mexico grew from the ninth to the seventh largest auto manufacturer in the world between 2010 and 2015 and the fourth largest auto exporter. It recently surpassed Japan as the second-largest auto parts exporter to the US.
When looking at its top 10 exports below, it’s also worthwhile to consider its growing expertise in manufacturing, stamping, metal mechanics and furniture assembly.
Top 10 exports:
- Automotive – 49%
- Electronic equipment, components and accessories – 19%
- Electrical appliances and electric power generation equipment – 7%
- Machinery and equipment – 5%
- Metallic products – 5%
- Oil and oil products – 5%
- Chemicals – 3%
- Basic metal industries – 3%
- Food industry – 3%
- Plastic and rubber industry – 3%
*data from www.inegi.org.mx (National Institute of Statistics and Geography)
Advantages of buying from Mexico:
Mexico and the US have always had close economic and diplomatic ties. One of the reasons is Mexico’s geographical location which expedites logistics and keeps shipment costs low. Some of the biggest advantages are fair labour cost and qualified manpower together with intellectual property laws which are aligned to those in the US. Overlapping time zones are also an obvious benefit.
Since January 1, 2019, the following taxes have been reduced in 43 US-Mexican border towns in Mexico; specifically, in the states of Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas:
- IVA (VAT) reduced from 16% to 8%
- ISR (the corporate tax rate) reduced from 30% to 20%
Finally, trade agreements that allow manufacturers in Mexico duty-free access to 60% of all other countries around the world are big reason foreign investors and manufacturers are flocking to Mexico.
Since 1986, Vietnam, a densely populated country in Southeast Asia, has been shifting from a centralized highly agrarian economy to an industrial and market-oriented economy. This has helped to lift incomes in the industrial parts of the country.
Electronic and electrical products are the country’s top exports. Vietnam has a strong competitive advantage in the market for electrical products, including smartphones, integrated circuits and micro assemblies, TV, radio or radar device parts.
Samsung is the largest Vietnamese exporter and has aided the country in achieving a trade surplus in 2018 for the first time in many years. The EU, China, the US, Korea, and Saudi Arabia are the main export destinations their phones.
The main footwear producers (e.g. Adidas, Puma, & Nike) are all based in Vietnam while having factories elsewhere. Currently, Vietnam is the fourth-largest manufacturer of footwear in the world. Only China, India, and Brazil produce more shoes. With the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (previously known as the TPP), this market will continue to grow.
Vietnam is also ranked number eight in the world in terms of furniture exports as reported by the Italian Centre for Industrial Studies. Large, global retailers send their designs and specifications of furniture to Vietnamese manufacturers, which they then build and export.
The main export partners of Vietnam are the US as 19 % of total exports. China (16 %), Japan (8%), South Korea (7%), Hong Kong (4%), and the Netherlands (3%) round out the top 6.
In 2018 Vietnams exports totaled $244.7 billion. During the seven years between 2012 and 2017 exports from Vietnam increased at an annualized rate of 13.5%, from $116 billion to $220 billion. This remarkable rise has been driven by smartphones, garments, and electronic home appliances. Monthly exports from Vietnam have increased from a low of $0.54 billion in February 1997 to an all-time an all-time high of $23 billion in August 2018. With a continuation of the trade war between the US & China and companies around the world continuing to diversify their supplier base, it is likely that monthly exports are continuing to break records.
Top 10 exports (2018):
- Electrical machinery, equipment including mobile phones – $107.8 billion (39%)
- Footwear – $21.8 billion (7.9%)
- Clothing, accessories (not knit or crochet) – $15.7 billion (5.7%)
- Machinery including computers – $15.1 billion (5.5%)
- Knit or crochet clothing, accessories – $14.6 billion (5.3%)
- Furniture, bedding, lighting, signs, prefab buildings –$9.7 billion (3.5%)
- Optical, technical, medical apparatus – $6.2 billion (2.2%)
- Fish – $5.5 billion (2%)
- Plastics, plastic articles – $4.1 billion (1.5%)
- Iron and steel – $4.1 billion (1.5%)
*data from www.customs.gov.vn (Ministry of Finance of Vietnam, General Department of Customs)
Advantages of buying from Vietnam:
Vietnam has wages substantially lower than in China, a young population, stable political environment, low inflation, decent infrastructure and strong manufacturing sector. Those factors as well as its proximity to China makes Vietnam a preferred destination for those looking to diversify their supplier base and manufacturing. The country already boasts thousands of factories that are owned by Chinese, Japanese, Korean and Taiwanese companies. This has resulted in an influx of know-how and development of a wide variety of production capabilities that can be tapped into by foreign buyers. The country is currently a star among emerging markets as a result of trade liberalization (various free trade agreements have been signed over the past 20 years*), with deregulation resulting in a lower cost of doing business as well as substantial investments in human capital and infrastructure.
*Vietnam joined the WTO in January 2007 and concluded several free trade agreements in 2015-16, including the EU-Vietnam Free Trade Agreement (not yet ratified), the Korean Free Trade Agreement, and the Eurasian Economic Union Free Trade Agreement.
Taiwan is one of the top manufacturers of intermediate goods in the world. Intermediate or semi-finished goods form part of other goods meaning they are not directly sold to end consumers. The most recognizable intermediate goods from Taiwan are electronic components, machinery and machine tooling equipment.
The probability is high that the computer you’re using, no matter the type or brand, has components of Taiwan origin. The country boasts the world’s leading computer chip producer along with major touch screen innovations that have given a big boost to the smartphone sector.
The computer giants Acer and Asus, as well as the phone producer HTC, are Taiwan’s largest electronic companies. CyberLink is a well-known Taiwanese software company along with D-Link, Trend Micro and Gigabyte which are supplying USB sticks, routers and hard drives to the international market.
Bicycles are another major item in Taiwan’s export list. Giant, Merida and other leading producers of medium- to high-end bicycles and components are also headquartered in Taiwan.
According to data from the International Monetary Fund, Taiwan is almost three times as productive as mainland China. Taiwan ranks among advanced economies such as Germany and Australia in GDP per capita. This means that production costs tend to be a bit higher than China but with an inherent understanding of the requisite quality.
Taiwan’s main trading partners are China ($73.9 billion), Hong Kong ($38.4 billion), US ($33.6 billion), Japan ($19.6 billion) and Singapore ($16.2 billion). Contrary to the predicted export slump, shipments from Taiwan increased 0.5% year-on-year to $28.39 billion as of June 2019. This was just shy of the monthly record high of $29.9 billion set in March 2018. Leading the way were information, communication and audio-video products (20.2%) as well as electronic parts (3.3%).
Taiwan’s Top 10 Exports
- Electrical machinery, equipment – $144.3 billion (43% of total exports)
- Machinery including computers – $40.6 billion (12.1%)
- Plastics, plastic articles – $22.4 billion (6.7%)
- Optical, technical, medical apparatus – $16.1 billion (4.8%)
- Mineral fuels including oil – $13.8 billion (4.1%)
- Organic chemicals – $11.5 billion (3.4%)
- Iron, steel – $10.4 billion (3.1%)
- Vehicles – $9.9 billion (3%)
- Articles of iron or steel – $8.6 billion (2.6%)
- Copper – $5 billion (1.5%)
* data from www.trade.gov.tw (The Bureau of Foreign Trade, Ministery of Economic Affairs)
Advantages of buying from Taiwan:
As an answer to the trade war between the US and China and to encourage Taiwanese companies overseas to return and invest in Taiwan, the country’s government offered the three-year (2019-2021) “Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan”. These measures aim to spur economic growth by driving development of local industries and cultivating the country’s future industrial competitiveness.
Zhang Mingbin, Managing Director of Taiwanese Investment Office, also announced that the five largest industrial supply chains (e.g. network communications equipment and bicycles) will form the core of Taiwan's 20-year development with the goal of re-patriating these industries as far as possible. With these goals in mind, Taiwan should go from strength to strength as a provider of high-quality parts and components across a number of industries and sectors. EDS is excited about these developments and continuing to provide our clients bespoke, scalable supply chain solutions.