China is the new darling of the trade community. The office of the U.S. Trade Representative lauds America’s trade with China as a large and growing market. It points out that China is the world’s second economy in real terms and a vast and growing market for U.S. products and services. It adds that the rising income of China’s nearly 1.3 billion consumers is fueling strong demand for farm products, manufactured goods and technical services. It also adds that “China is now the sixth largest market for U.S. exports and America’s third largest trading partner overall — surpassing Japan in 2003.”

Here is a beauty extolled by the trade representative’s office: “In 2003 the U.S. exported nearly $5 billion in agricultural goods to China, an increase of more than 140 percent over 2002.” A beauty because in the United States it is widely accepted that possibly as many as 85 percent of the agricultural workers are in the country illegally. So while overall trade, with emphasis on agriculture with China is lauded, Mexicans and to a lesser extent Central Americans, who are seen as the backbone of domestic agriculture, are demonized. Go figure.

Does it stop at demonizing Mexican workers? Nope. NAFTA is widely viewed as an uneffective trade agreement that should be done away with.

So maybe it would serve us well to do a comparison between mighty China and lowly Mexico and see how they each fare as our trade partners.

It is true that China sells a lot more to the United States than Mexico, and of course, total U.S. purchase (import) figures are added to the total two-way trade. It is this addition that has given China the status of being “America’s third largest trading partner.” But when it comes to purchasing from the United States, China falls to fifth place, behind Canada, Mexico, Japan and the United Kingdom.

China purchased $28.4 billion from the United States in 2003. That same year, Mexico purchased $97.4 billion. And 2003 was not an exception. In 2002 Mexico purchased $97.5 billion in U.S. products while China rang up $22.1 billion in merchandise. Not to be too picky, but a better than $69 billion and $75 billion difference is considerable, particularly since Mexico has been suffering, along with the United States, a severe recession, while China’s economy has expanded by 8 percent annually.

Now consider again that last year $5 billion of Chinese purchases were agricultural goods — that’s 17 percent of the total, a total that Mexicans had a large hand in making possible. So even there, the Mexican presence is most evident.

Mexico’s greater purchasing from the United States will continue, as is reflected by the 2004 figures through April. Mexico’s purchases are $35.3 billion to China’s $11.7 billion. This places Mexico on route to purchase more than $100 billion and China to reach about $35 billion. The ratio difference will be maintained.

Now we look at how much China and Mexico sell to the United States.

In 2003, China sold the United States $152.4 billion worth of goods, providing a hefty U.S.-China trade imbalance of $124.1 billion. More than $22 billion was computers and peripheral parts.

But in 2003, the United States also had a trade deficit with Mexico. Mexico sold us $138.1 billion for a trade imbalance of $40.6 billion or about 32 percent of China’s. Certainly, the deficit with Mexico is hefty. But when considering that the United States buys nearly $14 billion of oil from Mexico that it must buy from somewhere, the trade imbalance shrinks by a third. Additionally, nearly 2,000 U.S.-owned or U.S.-based companies have assembly/manufacturing plants in Mexico. They send U.S.-made components to Mexico where they are transformed and shipped back to the United States. So let’s say a U.S. component is worth a dollar, sent to Mexico where through assembly labor the value increases by 50 cents. When the piece is exported from Mexico to the U.S., its actual import value is 50 cents but it is entered as $1.50.

Of course, there are those who would argue that the same holds true for the dollar sale to Mexico — it shows as a Mexican import purchase, but in reality it is not. And that is true, but there are benefits that overshadow this calculation.

The reason why the U.S. can sell China $5 billion of agricultural goods is because of the low-cost labor supplied by Mexicans that allows those products to be competitive. Similarly the components sent to Mexico are then transformed into greater value by lower cost labor, which in turn makes the returned piece competitive in the U.S. market as well as for export markets. So the dollar sale to Mexico and repurchase for $1.50 represents no less than 50 percent savings, without which the product could not be competitive and would cease to be made altogether.

It would seem that were we to stop the torrential mental-abuse on Mexico and instead concentrate on the positive, we might be able to get our neighbor to become a world-class economy that would resolve a continual source of friction between us.

Patrick Osio Jr. can be reached at posiojr@sandiegometro.com. The veteran consultant also has issued The Mexican Perspective, an intensive primer on business culture and protocol. Copies are available at http://www.hispanicvista.com/sales/book_sale.htm.