How to Tap Progress: The Role of Trade Openness Raymond Robertson Macalester College

Trade Policy in Three Parts Mexico’s recent trade policy The Apparel Experience North American Integration Prospects for the future

Trade Policy

A Remarkable Transformation Trade liberalization in early 1990s GATT 1986 NAFTA 1994 WTO 1996 Trade Policy: TTBs

Mexico: A Liberalization Leader Mexican Average Tariff Rates Robertson, Raymond (2011) “Mexico: A Liberalization Leader?” in Bown, Chad P. (ed) The Great Recession and Import Protection: The Role of Temporary Trade Barriers. London, UK: CEPR and the World Bank.

Increasing Trade Diversity Total Mexican Imports

Average Anti-dumping Duties Imposed Country Number of Covered HS8 Categories Earliest Final Dumping Decision Date Latest Final Dumping Decision Date Simple Average Duty China May-9216-Apr Indonesia14-Jul Germany529-Feb-8828-May Japan425-Jun-9030-Oct India217-Oct-917-Dec EU513-Jul-9023-Aug Ukraine131-Jul-959-Apr Netherlands525-May-9219-Dec Brazil3529-Nov-8824-Jan Canada619-Dec-959-May Russia161-Jul-958-Sep Kazakhstan229-Jun USA774-Sep-877-Sep South Korea59-Aug-9328-Feb Guatemala213-Jan Venezuela223-Dec-9128-Dec Denmark228-Mar-0017-Dec Spain43-Apr-8912-Dec Taiwan411-Oct-9014-Nov United Kingdom123-Dec Chile120-Oct-948-May

Annual Probit Results

Anti-Dumping Covered Trade by Country

Anti Dumping Probit by Country:

Trade Policy: Main Points Mexico has largely embraced trade liberalization Although USA remains important trading partner, Mexico has aggressively pursued trade agreements with other countries; trade has diversified Mexican TTB measures began with notable focus on China with large number of AD duties Focus remains on the USA and China Duration is often long Very little evidence of increase during the crisis; crisis measures fit into recent context rather than seeming to be a break from past patterns Main lesson: Hard to blame trade policy for lack of growth

Apparel

Big Picture Hanson, Gordon, and Robertson, Raymond (2010) “China and the Manufacturing Exports of Other Developing Countries” in Feenstra, Robert and Shang-Jin Wei (Eds.) China's Growing Role in World Trade, National Bureau of Economic Research. Also NBER Working Paper Overall, Mexican competition from China is limited In certain sectors, however, Chinese market share rose while Mexico’s fell Main example: Apparel

Popular Perception Star Tribune 14 September 2012 p. D1

Apparel Exports: Change After MFA Lopez-Acevedo, Gladys and Raymond Robertson (eds) (2012) Sewing Success? Employment, Wages, and Poverty Following the End of the Multi-Fibre Arrangement, The World Bank, Washington, D.C.

Implications Has Mexico moved beyond apparel and into other goods? Yes Will apparel return to Mexico if Chinese wages continue to rise? Unlikely: Other suppliers have much lower costs and higher product responsiveness ◦Bangladesh ◦Cambodia

North American Economic Integration

Mexico’s Trade Strategy NAFTA’s goal: Increase trade and investment among North America Trade and investment increased Restructuring of Mexico’s manufacturing: ◦Integration into North American production chain ◦Continued emphasis on assembly operations ◦Innovation?

U.S. and Mexican MFG Employment Robertson, Raymond (2009) “Estimating International Labor Complementarity: Some Preliminary Results”, in Soloaga, Isidro (ed.) Sobre México: Temas actuales de política económica Universidad Popular Autónoma del Estado de Puebla (UPAEP), Puebla, Mexico,

Employment and Wage Responses to Trade Shocks: Evidence from Mexico during the U.S. Recession (2012 Working Paper) David S. Kaplan (Inter-American Development Bank, Daniel Lederman (World Bank, Raymond Robertson (Macalester College,

North American Integration Prior to NAFTA, U.S. production workers ◦and Mexican empleados were complements ◦and Mexican obreros were substitutes After NAFTA, U.S. production workers ◦and Mexican empleados were substitutes ◦and Mexican obreros were complements We should think of North America as a single production unit. But…

Source: U.S. BLS CES

Progress in the Value Chain Context Integration into value chain has distinct advantages Key to progress in the value chain context is the ability to upgrade ◦Process ◦Products Countries with directed policies towards upgrading tend to have more success

Conclusions Mexico has been a leader in trade liberalization among developing countries Mexico merged into the North American value chain Continued diversification important Key to success in value chain context is directed policies to encourage upgrading