ARIZONA & MEXICO

Exhibit 3: Arizona’s Merchandise Exhibit 3: Arizona's Export Growth Exhibit Merchandise 3: Arizona's Export Merchandise Growth Export Growth
30
30
Exports to Mexico
Exports to Mexico
20
20
Exports to Rest of World
Exports to Rest of World
10
10
Percent
0
0
Exhibit 3: Arizona's Merchandise Export Growth
-10
Percent
-10
-20
-20
Exports to Mexico
-30
-30
Exports to Rest of World
-40
-40
2002 2003 2004 2005 2002 2006 2003 2007 2004 2008 2005 2009 2006 2010 2007 2011 2008 2012 2009 2013 2010 2014 2011 2015 2012 2013 2014 2015
Source: Arizona-Mexico Economic Indicators
As Exhibit 3 also shows, Arizona’s exports of goods declined during 2009, reflecting the impact of the
global economic crisis. The crisis impacted export growth because most countries around the world
experienced declining income growth (or outright declines in income), which is one key driver of
exports. Countries with declining income tend to purchase fewer goods and services, including those
bought from abroad, other things the same.
The good news on this front is that the Mexican economy has been expanding lately and it is expected
to continue to grow. One important risk to the continued growth, however, is the rapid decline in crude
oil prices since mid-2014. In addition, Mexico is also a relatively large economy. According to data from
the Organization for Economic Cooperation and Development (OECD) Mexican nominal GDP was U.S.
$2.0 trillion in 2013. That was similar to the GDP of Italy and larger than GDP for South Korea, Spain, and
Canada, for example. Of course, U.S. GDP was much larger in 2013, at $16.7 trillion. The OECD estimates
Mexico’s population in 2013 at 118.4 million, larger than Germany, France, the U.K., and Italy. U.S.
population in 2013 was 316.5 million.
THE POTENTIAL IMPACT OF A STRONG U.S. DOLLAR ON TRADE WITH MEXICO
Another important driver of U.S. and Arizona exports is the value of the U.S. dollar. If the dollar
appreciates against most foreign currencies, this will tend to reduce U.S. exports (and increase U.S.
imports from abroad), other things the same. The reason is simple: a U.S. dollar appreciation means that
2003 one 2004 unit of foreign 2005 currency 2006 buys 2007 fewer U.S. 2008 dollars. 2009 This, in turn, 2010implies 2011 reduced 2012 purchasing 2013power 2014 in 2015
the U.S. and lower U.S. exports.
One major development during the past year and a half has been a significant appreciation in the value
of the U.S. dollar versus most foreign currencies. As Exhibit 4 shows, the dollar rose by 22.2% from June
2014 to January 2016 against a broad market basket of currencies and is now at its highest level since
March 2003. The dollar appreciation has been driven by widening differences in interest rates and
economic growth across the globe.
27 • ARIZONA & MEXICO • ARIZONA TOWN HALL • APRIL 2016