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From Export Promotion to Import substitution:. Comparative Experience of China and Mexico Mehdi Shafaeddin Director: Global Vision (Training & Consultancy) Affiliated to the Institute of Economic Research, University of Neuchatl, Switzerland. The QUESTIONS.

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From export promotion to import substitution l.jpg

From Export Promotion to Import substitution:

Comparative Experience of China and Mexico

Mehdi Shafaeddin

Director: Global Vision

(Training & Consultancy)

Affiliated to the Institute of Economic Research, University of Neuchatl, Switzerland


The questions l.jpg

The QUESTIONS

  • What is the experience of China and Mexico in export processing?

  • Why is China more successful than Mexico

  • Can the experience of China be replicated?

    In two papers


Outline l.jpg

Outline

  • The literature

  • Performance of trade, MVA & GDP

  • Performance of Processing Industries

  • Conclusions:Prospects for the future


The literature l.jpg

The literature

  • Import Substitution and Export Promotion as Alternative Strategies

  • The process of MS & Prebisch’s thinking

  • MS as prerequisite to EP

  • Common Argument: Emphasize on learning

    • MS: Learning by doing

    • (outward-orientation )EP: Transfer of knowledge & Tech.

    • Opening up: imitation; catch-up opportunities; innovation

  • Differences

    • MS: need for Gov. intervention

    • EP: Hands off


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Critiques of MS,EP

  • Contribution to Learning: not much in either case

  • MS: often discouraged learning;

    • Reasons; lack of efficient Gov. policies

    • exceptions

  • EP: did not appreciate internal conditions for learning:

    • Simply exporting is not sufficient

    • Learning is not automatic

    • Gov policies required


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Literature (2):Productive Power (PP) and Learning

  • List: mental capita as main source of PP

    • Role of socio-economic factors

    • Importance of gov. Policies in industrial learning and education ;

    • external economies of learning

  • Others :Arrow, Linder;Fellner: role of experience

  • Capability Building Theory

    • Role of tech. capability in a broad sense

    • Market failure

    • Need for intervention

  • Test of Impact of FDI: Experience of Costa Rica/ Ireland


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Mexico &China :Similarities & differences

  • Similarities:

    • Opening up to trade; FDI and processing

  • Difference: performance: (table 1)

    • Growth of Xman.

    • Trade balance

    • FDI; national I

    • MVA;GDP (graph 1)

    • Trade in Parts (table 1.a


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Table 1.a:Trade in Parts and Components: Manufactured

Good; China and Mexico

--------------------------------------------------------------------------------------

1992/32003/4

China :Value($b)

Exports3.258.4

Imports9.844.6

Balance-6.5713.8

Shares : Components/total X:6.317.6

Mexico:Value($b)

Exports6.826.3

Imports13.833.8

Balance-7.5-7.5

Shares : Components/total X:20.223.9

Meomo: balance of man. trade ($b):

China-5.8125.2

Mexico-17.8-1.7


Performance of maquila sector mexico l.jpg

Performance of Maquila sector Mexico


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Performance of Maquila and non-aquila:1


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Processing trade of China: Evolution


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What are the prospects for increasing value added in assembly operation of China and Mexico?

Evolution of pattern of CA

RCA indices:

Rx= [Xij/Xj]: Xwi/Xw];

Rm = [M ij / Mj ]  [ M wj / Mw ];

Cr= (Change in R)/R

Prospects for the Future


China rca in x l.jpg

China: RCA in X

  • Choice of about 30 products=64% of X

  • RCA in almost all

  • 13 capital/tech. intensive; mostly elect.

  • 14 L intensive

  • Gain RCA (increase in Cr) in K/T, particularly elect.

  • Loss in Cr in most L intensive

  • So good prospects for X; BUT?

    How about production?


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China: RCA & M:ComponentsAssembly Operation or Production?

  • Choice pf products: 30: 67% of M

  • Intermediate/components:19; bulk of M

  • Comparative advantage in assembly in all components: except automobile

  • Advantage in assembly increased in most cases

  • However in 4 cases (of components) adv. In production increased

  • How about finished good?


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China: RCA & M: Finished productsProduction?

  • Increase in adv. In production of:

    • Telecommunication equipment

    • Specialized machinery

    • Textiles and leather machinery

    • Aircraft

    • Machine tools for working metals

    • Passenger cars


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Mexico: RCA: X

  • Choice of products : similar to China

  • Mexico exports higher no. of K/T intensive products than china(18 out of 29)

  • Automotive &elect. 25 % of X

  • Gained adv. On components of auto. &data processing

  • Lost adv. In X on 11 K/T intensive finished goods

  • How about assembly operations?


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Mexico: RCA: MProduction?

  • Paperboard the only intermediate product (out of 13)with adv. in production; but adv. In assembly increased!

  • Finished goods: advantage in production in:

    • Automotive

    • Data processing

      Examine these cases


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Auto. &data processingProspects

ExportsImports

RRcRRc

1.Office machines and auto.data processing:

Finished products:

7510.630.450.440.42

7522.0763.6770.911.48

Components:

SITC 7590.8011.4381.2773.612

2.Automotive products:

Finished products:

7811.5180.9910.6725.366

7824.2313.3881.083.81

7831.5820.340.250.19

Components

7841.71.12.323.66


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Conclusions

China

Mexico

Question?


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