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Reassessing China-Mexico Competition

By Margaret Myers
September 16, 2011

Chinese competition remains a serious issue for Mexico’s manufacturing sector, according to Enrique Dussel Peters, Adrian Hearn, and Yang Zhimin, who engaged in a wide-ranging discussion of China-Mexico industrial competition at the Inter-American Dialogue on Friday, September 16, 2011.

Despite reports in recent months that Mexican manufacturing is experiencing a possible resurgence – the country’s share of US imports increased markedly this summer and is attracting much in the way of manufacturing-related foreign investment – Mexico’s industrial sector is still facing tremendous challenges. Manufacturing as a share of GDP continues to shrink, and rising unemployment in the manufacturing sector remains an issue of concern – Mexico lost approximately one million manufacturing jobs over the past decade.

China’s trade with the Mexico has exposed vulnerabilities in Mexican R&D, trade, infrastructure, and industrial policy, according to Enrique Dussel Peters, who directs the Center for Chinese-Mexican Studies at UNAM. Dussel Peters described an urgent need for short-, medium-, and long-term industrial strategies to address these shortcomings.

Panelists lamented the Mexican government’s failure thus far to implement effective industrial policy. According to Adrian Hearn, an anthropologist at the University of Sydney, the Mexican government has neglected – especially in comparison to certain Asian countries – to select and promote industrial "winners” that can drive sector production and innovation.

While there have been some efforts in Mexico to address manufacturing and trade-related challenges, most come from non-official or local-level actors. Much of existing bilateral cooperation takes place at the provincial and municipal levels, according to Dussel Peters. The Mexican states of Michoacán, Guanajuato, and Chihuahua all actively engage China on areas of commercial interest, for example. Research centers like Dussel Peters’ Center for Chinese-Mexican Studies also work to identify specific value-added chains, such as automobiles and auto parts, which are critical to manufacturing growth over the next few years.

Assuming they are able to develop cost-effective channels for promoting imports and exports between the China and Mexico, Mexico’s sizeable Chinese immigrant communities might also enhance trade flows between the two countries, according to Hearn.

China’s recent manufacturing sector challenges are unlikely to benefit Mexican industry, according to Yang Zhimin from the Chinese Academy of Social Sciences. Rising labor costs and lending restrictions have negatively affected small and medium-sized firms in some provinces, but China’s manufacturing sector remains highly competitive. Provinces like Zhejiang are moving beyond low-cost, labor-intensive manufacturing, according to Yang. Mechanized production enables these firms to avoid the rising labor costs affecting labor-intensive production in the Pearl River Delta and elsewhere in China.

Mexico must now work to strengthen its domestic, regional, and bilateral ties, according to the panelists. Hearn argued for stronger linkages with Mexico’s overseas Chinese community and with networks of importers and exporters more broadly. As Chinese competition calls into question NAFTA’s integrity, Mexico and the United States must work to address manufacturing competitiveness issues from a regional perspective, according to Dussel Peters. Yang advocated stronger State-to-State and firm-level bilateral cooperation, not only on trade-related issues, but also toward greater investment-related and commercial interaction.

Click HERE to view Enrique Dussel Peters' powerpoint presentation.