Towards the Spatial Patterns of Sectoral Adjustments to Trade Liberalisation: The Case of NAFTA in Mexico

ABSTRACT A recent string of “new economic geography” (NEG) models has set focus on the impacts of trade liberalisation on the intra‐national distribution of economic activity. What the existing contributions have in common is a basic two‐sector assumption (agriculture/manufacturing) and a resulting focus on the question of whether liberalisation leads to a greater concentration of aggregate manufacturing activity. Reconsidering these models from a multi‐sectoral perspective, the aim is to allow for sectoral differences in the spatial adjustments to liberalisation. This introduces a conceptual nexus between comparative advantage (CA)‐type sectoral recomposition effects of trade and NEG‐type spatial adjustments. In the analysis of Mexican manufacturing location 1993–2003, incipient empirical evidence is found in favour of the hypothesis that sectors characterised by a revealed comparative advantage and/or cross‐border intermediate supplies grow faster in regions with good foreign market access, whereas import competing ones gain in relative terms in regions with higher “natural protection” from poor market access. The relevancy of the proposed NEG/CA framework concerns both efficiency and equity objectives of trade adjustment policies, and opens a new perspective on the long‐run effects of trade on spatial inequality.