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From Export Promotion to Import substitution:

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:

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  1. 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

  2. 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

  3. Outline • The literature • Performance of trade, MVA & GDP • Performance of Processing Industries • Conclusions:Prospects for the future

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. Performance of Maquila sector Mexico

  10. Performance of Maquila and non-aquila:1

  11. Processing trade of China: Evolution

  12. 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

  13. 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?

  14. 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?

  15. 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

  16. 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?

  17. 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

  18. Auto. &data processingProspects 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

  19. Conclusions China Mexico Question?

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