Transcript 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
• 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
• The literature
• Performance of trade, MVA & GDP
• Performance of Processing Industries
• Conclusions:Prospects for the future
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
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
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
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
Table 1: Comparative economic Performance of china and Mexico (1965-2005)
China
Growth rates
Mexico
65-80
80-90
90-2000
2000-2005
2004
2005
60-80
80-90
90-2000
2000-2005
2004
2005
Manufacturing value Added
10.5
10.8
12.7
11.3
10.7
10
0.9
1.5
4.3
0.0
4.0
1.2
Gross Domestic Product
6.6
10.3
10.6
9.6
10.1
9.9
6.3
1.1
3.1
1.9
4.1
3.0
Gross Fixed Capital Formation
9.7
9.8
13.9
14.8
12.4
14.6
7.7
-2.7
4.1
1.8
7.5
7.6
Total Exports
12.8
14.5
23.7a
31
5.9
16.1
3.5.a
14.3
(Xman-Mman)/Xman. Initial
period/%)
-1.65
4.5
22.6
18.3
-67
-58
-13.1
-16
Ratios
70/71
80/81
90/91
04/05
70/71
80/81
90/91
04/05
MVA/GDP
34.4
39.5
32.8
44.1
23.1
22.1
20.7
17.9
GFCF/GDP
24.5
27.5
26.5
38.4
19.0
25.6
18.3
19.5
FDI/GDP
0.0
0.1
1.0
3.5
0.8
1.1
1.3
2.3
Exports of Manufactures / Total
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 ($b):
China
-5.8
125.2
Mexico
-17.8
-1.7
Performance of Maquila sector Mexico
1974
1985
2000
2006
Ratio
98/85
Ratio
06/98
- Gross
output ($b)
0.01
1.3
669
1139 341
2.6
- Local
input:%
0.9
0.7
2.4
2.8
2.4
1.3
-VA:%
36.3
24.9
22.1
20.4 0.6
0.9
RV.%
37.2
25.6
24.5
23.2 0.93
1
Imported
input:%
64.3
75.1
75.6
76.7 1.2
1
Performance of Maquila and non-aquila:1
Pe r for m ance of the m aquilador a s e ctor (1980-2006)
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
1980
1982
1984
1986
1988
1990
1992
Maquil exports/Non petrol exports
A Maquil trade balance / Maquil exports *100
1994
1996
1998
2000
2002
2004
Maquil exports/Maquil interm imports
2006
Pe r for m ance of non-m aquilador a e xpor t s e ctor (1980-2006)
120
110
100
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
-110
-120
-130
-140
-150
-160
-170
-180
-190
-200
-210
-220
-230
-240
-250
-260
-270
-280
-290
Processing trade of China:
Evolution
year
Value($10m)
Ratios
Xp
Mp
RV Xp/Xm RV/Xp
1981
11
15
-3.7
5
-32
1990
254
188
67
55
26
2000
1377
926
451
62
33
2006
4164
2740 1423
58
34
Prospects for the Future
• 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
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?
China: RCA & M:Components
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?
China: RCA & M: Finished products
Production?
• Increase in adv. In production of:
– Telecommunication equipment
– Specialized machinery
– Textiles and leather machinery
– Aircraft
– Machine tools for working metals
– Passenger cars
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?
Mexico: RCA: M
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
Exports
R
Rc
Imports
R
Rc
1.Office machines and auto.data processing :
Finished products:
751
0.63
0.45
0.44
752
2.076 3.677
0.91
Components:
SITC 759
0.801 1.438
1.277
0.42
1.48
3.612
2.Automotive products:
Finished products:
781
1.518
782
4.231
783
1.58
0.991
3.388
20.34
0.672
1.08
0.25
5.366
3.81
0.19
Components
784
1.1
2.32
3.66
1.7
Conclusions
China
Mexico
Question?