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From Export Promotion To Import Substitution; Comparative Experience of China and Mexico

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  • Shafaeddin, Mehdi
  • Pizarro, Juan

Abstract

Abstract Both Mexico and China have started export orientation in some industries, through assembly operations, based on imported inputs a couple of decades ago. The literature on industrialization, has discussed the questions of import substitutions and outward-orientation mainly as alternative routes to industrialization. In both cases, it is argued that “learning” would contribute to industrial development. Proponent of import substitution argued that import substitution contributes to industrial development through “learning by doing”. Those in favour of free trade and outward orientation argue that trade contributes to the transfer of knowledge and technology. This study is the first part of a twin study in which the authors attempt to shed some light on the comparative experience of the two countries in the light of the above-mentioned literature. The present study is devoted to the establishment of facts, while in the second study an attempt will be made to provide an explanation for differences in the performance of the two countries and the role played by their government in order to see whether the process, if successful, is replicable elsewhere. China and Mexico the process of trade liberalization and development of export oriented industries started, following a period of pursuing import substitution strategy , more or less, at the same time-if not earlier in the case of Mexico. It will be shown in this study that both countries have managed to develop comparative advantage in many industries initiated through import substitution; but China has been more successful than Mexico in gradually increasing value added in export oriented industries by substituting domestic production for imported inputs in these industries. The first section is devoted to a brief survey of the literature. In the second section, we will shed some light on the general trends in development of export promotion industries and general performance of the manufacturing sector in exports and production. The third section is devoted to the analysis of processing trade and value added in assembly operations through production of domestic components. In section four we will investigate the evolution of revealed comparative advantage in exports, production and assembly operation of traded finished goods and parts and components in order to shed some light on their future export prospects. The final section will conclude the study. . 2

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6650.

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Date of creation: Jun 2007
Date of revision: Oct 2007
Handle: RePEc:pra:mprapa:6650

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Keywords: Mexico; China; Industrialization; Value added; Trade policy; Import substitution; export expansion;

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References

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  1. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  2. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  3. Bell, Martin & Ross-Larson, Bruce & Westphal, Larry E., 1984. "Assessing the performance of infant industries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 101-128.
  4. Chang, Ha-Joon, 1993. "The Political Economy of Industrial Policy in Korea," Cambridge Journal of Economics, Oxford University Press, vol. 17(2), pages 131-57, June.
  5. Krueger, Anne O, 1998. "Why Trade Liberalisation Is Good for Growth," Economic Journal, Royal Economic Society, vol. 108(450), pages 1513-22, September.
  6. Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
  7. Shafaeddin, Mehdi, 2006. "Does trade openness helps or hinders industrialization?," MPRA Paper 4371, University Library of Munich, Germany.
  8. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-61, September.
  9. Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
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Cited by:
  1. Shafaeddin, Mehdi & Gallaher, Kevin, 2008. "Policies for Industrial Learning in China and Mexico: Neo-developmental vs. Neo-liberal approaches," MPRA Paper 11041, University Library of Munich, Germany.
  2. Shafaeddin, Mehdi, 2008. "South-South Regionalism And Trade Cooperation In The Asia-Pacific Region," MPRA Paper 10886, University Library of Munich, Germany.
  3. Kevin P. Gallagher & Mehdi Shafaeddin, 2009. "Policies for Industrial Learning in China and Mexico," Trade Working Papers 22782, East Asian Bureau of Economic Research.

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