Extract B (lines 1–2) states: 'In recent years, rising concerns over national sovereignty and regulatory compliance have led some critics to question Mexico's deep integration within the USMCA.'

Do you agree with the view that the Mexican economy would benefit if Mexico withdrew from the USMCA? Justify your answer using the data and your economic knowledge.

Extract A: GDP at current prices ($US billion) for selected Americas nations, 2018–2021

Extract B

In recent years, rising concerns over national sovereignty and regulatory compliance have led some critics to question Mexico's deep integration within the USMCA. Supporters and opponents of the trade bloc's terms have presented coherent arguments.

A study by an independent domestic think-tank estimated that compliance with the USMCA's modernized labor standards and automotive origin rules costs Mexican manufacturing businesses upwards of $8.5bn annually. This includes the cost of upgrading manufacturing facilities to meet high regional value content requirements (75% for light vehicles) and ensuring rapid-response labor mechanism compliance. Critics argue this protects high-cost domestic producers in the US and Canada at the expense of Mexican cost-competitiveness. Furthermore, strict regional origin rules prevent Mexican producers from sourcing cheaper raw materials and electronics from dynamic East Asian markets, raising costs for consumers.

On the other hand, those supporting USMCA membership point to the estimated 4.8 million Mexican jobs directly linked to trade within North America, largely supported by an export-led multiplier. The free trade zone has eliminated most tariff barriers, generating massive investment inflows as global firms 'nearshore' production to Mexico to access the US consumer market. The UK and other non-regional powers have continued to seek trade deals with North America, highlighting the strategic importance of this trade corridor. USMCA proponents argue that leaving the agreement would relegate Mexico to 'sitting on the margins' of global trade, severely damaging its manufacturing base and reducing incoming Foreign Direct Investment (FDI).

Extract C

Chile, which operates with a highly diversified network of independent bilateral free trade agreements rather than relying on a single dominant regional trade bloc, has achieved an average annual GDP growth rate of 3.2% over the past three decades.