How to Tap Progress: The Role of Trade Openness

1. How to Tap Progress: The Role of Trade Openness Raymond RobertsonMacalester College

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

3. Trade Policy

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

5. Mexican Average Tariff Rates Mexico: A Liberalization Leader 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.

6. Total Mexican Imports Increasing Trade Diversity

8. Annual Probit Results

9. Anti-Dumping Covered Trade by Country

10. Anti Dumping Probit by Country:

11. 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 Trade Policy: Main Points

12. Apparel

13. 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 14497. • Overall, Mexican competition from China is limited • In certain sectors, however, Chinese market share rose while Mexico’s fell • Main example: Apparel Big Picture

14. Star Tribune 14 September 2012 p. D1 Popular Perception

18. 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.

19. 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 Implications

20. North American Economic Integration

21. 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? Mexico’s Trade Strategy

22. U.S. and Mexican MFG Employment Robertson, Raymond (2009) “Estimating International Labor Complementarity: Some Preliminary Results”, in Soloaga, Isidro (ed.) Sobre México: Temasactuales de políticaeconómica Universidad Popular Autónoma del Estado de Puebla (UPAEP), Puebla, Mexico, 53-70.

25. Employment and Wage Responses to Trade Shocks: Evidence from Mexico during the 2008-09 U.S. Recession (2012 Working Paper) David S. Kaplan (Inter-American Development Bank, dkaplan@iadb.org) Daniel Lederman (World Bank, Dlederman@worldbank.org) Raymond Robertson (Macalester College, robertson@macalester.edu)

26. 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… North American Integration

27. Source: U.S. BLS CES

28. 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 Progress in the Value Chain Context

29. 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 Conclusions