Appendix 1. Data AND Methodology Used
Balassa, B., 1965, “Traded Liberalization and "Revealed" Comparative Advantage”, The Manchester School of Economic and Social Studies, 33, 99–123.
Chami Batista, J., 2008, “Competition between Brazil and other Exporting Countries in the U.S. Import Market: a New Extension of Constant-Market-Shares Analysis”, Applied Economics, 40, pp. 2477–2487.
Chiquiar, D. and M. Ramos Francia, 2009, "A Note on Mexico and U.S. Manufacturing Industries’ Long-term Relationship," Banco de México Working Paper 2008–08.
Chiquiar, D. and M. Ramos Francia, 2009, "Competitiveness and Growth of the Mexican Economy," Banco de México Working Paper 2009–11.
Chiquiar, D., E. Fragoso and M. Ramos Francia, 2007, “La Ventaja Comparativa y el Desempeño de las Exportaciones Manufactureras Mexicanas en el Periodo 1996–2005”. Banco de México Working Paper 2007–12.
Devlin, R., A. Estevadeordal and A. Rodriguez-Clare (eds.), 2006, “The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean”, Washington, DC: Inter-American Development Bank.
Freund, Caroline, and Caglar Ozden, 2007, “The Effect of China’s Exports on Latin American Trade with the World”, Mimeo, World Bank.
Hanson, G., and. R Robertson (2007). “China and the Manufacturing Exports of Other Developing Countries”. Forthcoming in R. Feenstra and S. Wei (eds.), China’s Growing Role in World Trade. Chicago: University of Chicago Press.
Iacovone, L., F. Rauch, F. and L. A. Winters, “Trade as an Engine of Creative Destruction: Mexican experience with Chinese competition”, Journal of International Economics (forthcoming).
Lall, S., J. Weiss and H. Oikawa, 2005, “China’s Competitive Threat to Latin America: an Analysis for 1990–2002”, Oxford Development Studies, 33(2): 163–194.
Lederman, D., M. Olarreaga and E. Rubiano, 2008, “Trade Specialization in Latin America: the Impact of China and India”, Review of World Economics. 144(2): 248–271.
Mesquita Moreira, M., 2007, “Fear of China: Is There a Future for Manufacturing in Latin America?”, World Development, 35(3): 355–376.
Shirotori, M., B. Tumurchudur and O. Cadot, 2010, “Revealed Factor Intensity Indices at the Product Level”, Policy Issues Series No. 44, UNCTAD.
Prepared by Herman Kamil and Jeremy Zook. Enrique Flores and Esteban Vesperoni also contributed to the project.
The relocation of manufacturing activities (including from the Maquila industry) from North America to China, and Asia more generally, also explained the low export growth.
Several studies have used sectoral flow data to assess the impact from Chinese exports on Mexican and other Latin American producers (Freund and Ozden, 2006; Hanson and Robertson, 2007; Lederman et al., 2008; Devlin et al., 2006; Lall et al., 2005). More recently, Iacovone, Rauch and Winders (forthcoming) provide evidence on the impact of Chinese competition on Mexican manufacturing firms between 1996 and 2004.
Based on revealed comparative advantage measures, Chiquiar and Ramos-Francia (2008) provide evidence that the Mexican manufacturing sector reacted to the increase in China’s competition by shifting resources towards sectors where it remained competitive. This allowed the effect of China’s entry to the WTO to be only temporary.
In contrast, during the period 2001-2004, Mexico lost market share in U.S. imports in 13 of the 26 sectors.
Among the sectors that lost market share, the most important is electrical machinery, apparatus and appliances, which accounted for 14 percent of Mexican exports in 2012, and lost 1.1 percentage points in market share over this period. The biggest decline occurred in the U.S. import market share of apparel and clothing products, which fell 8 percentage points from its peak of 14 percent at the beginning of the last decade.
Mexico was the third-largest investment destination for the automotive sector in the world, receiving US$5.6bn during 2007–10, above Japan and the BRICs, according to PROMEXICO. While the industry has been largely dominated by U.S. manufacturers in the past, more recently, companies from other countries, particularly Asia, have opened or expanded operations in Mexico. See Martin (2012) for a detailed analysis of FDI flows into Mexico’s manufacturing sector in recent years.
We exclude the period 2008–2009 to avoid temporary effects associated to the global crisis.
Among the sectors in which Mexico lost and China gained market share during 2010–2012, the most relevant for Mexico was “Telecommunications and sound-recording and reproducing apparatus and equipment”, which lost 1.1 percentage points over the period. This sector accounted for 13 percent of Mexican exports in 2012.
The gain in market share of one exporting country that is attributed to one of its competitors is proportional to the difference between the rates of growth of the value of exports of the two countries over the period. See the Appendix for a description of the method. Calculations were performed at the 2-digit level of aggregation.
Part of this reduction in China’s market share may be due to a shift in China’s exports towards a different set of goods.
See also Oviedo (2012) for an analysis of the sectors in which Mexico gained competitiveness during the period 2010–2012.
The authors construct the indices by calculating, for each good, a weighted average of the factor abundance of the countries that export this good, where the weights are variants of Balassa’s (1965) revealed comparative advantage index.
Subdued wage growth is in part associated with an increase in labor participation and in the growth rate of the working age population, from a reduction in migration to the U.S. since the mid-2000s (sees Selected Issues Paper “Migration and Labor Markets”).
Reliable data on unit labor costs in the Chinese manufacturing sector is not available, preventing an assessment of the evolution of wages in China accounting for changes in productivity.
Several cost drivers are factored into the analysis, including wages and productivity, exchange rates, and freight fees, overhead, raw materials, duties, and in-transit inventory (AlixPartners, 2011).
Under the Waasenaar Arrangement, the 41 signatory nations cooperate and adhere to export controls for conventional arms and dual-use goods and technologies.
On June 2012, Mexico was formally invited to join the ongoing negotiations for the Trans-Pacific Partnership (TPP), a proposed free trade agreement involving the United States and eight other countries.
For instance, Mexico is a signatory of the Bilateral Aviation Safety Agreement (BASA), which brings it into the global aerospace supply-chain by allowing aircraft parts to be shipped overseas for assembly without first undergoing an international inspection. This has bolstered Mexico’s manufacturing capabilities in the aerospace sector: more than 260 aerospace companies now operate in Mexico (mostly in the Tijuana-Mexicali cluster), exporting some $4.3 billion in aircraft and parts in 2011.