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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

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

1992/3 2003/4

China :Value($b)

Exports 3.2 58.4

Imports 9.8 44.6

Balance -6.57 13.8

Shares : Components/total X: 6.3 17.6

Mexico:Value($b)

Exports 6.8 26.3

Imports 13.8 33.8

Balance -7.5 -7.5

Shares : Components/total X: 20.2 23.9

Meomo: balance of man. trade ($b):

China -5.8 125.2

Mexico -17.8 -1.7


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Performance of Maquila sector Mexico


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Performance of Maquila and non-aquila:1



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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 assembly operation of China and Mexico?

  • 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?


China rca m components assembly operation or production l.jpg
China: RCA & M:Components assembly operation of China and Mexico?Assembly 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 products assembly operation of China and Mexico?Production?

  • 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 assembly operation of China and Mexico?

  • 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: M assembly operation of China and Mexico?Production?

  • 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


Auto data processing prospects l.jpg
Auto. &data processing assembly operation of China and Mexico?Prospects

Exports Imports

R Rc R Rc

1.Office machines and auto.data processing:

Finished products:

751 0.63 0.45 0.44 0.42

752 2.076 3.677 0.91 1.48

Components:

SITC 759 0.801 1.438 1.277 3.612

2.Automotive products:

Finished products:

781 1.518 0.991 0.672 5.366

782 4.231 3.388 1.08 3.81

783 1.58 20.34 0.25 0.19

Components

784 1.7 1.1 2.32 3.66


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Conclusions assembly operation of China and Mexico?

China

Mexico

Question?