How China is eating Mexico's lunch: the Maquiladora system's comparative advantage is being challenged head on

International Economy, The, Spring, 2003 by Daniel H. Rosen

Maquiladora exports have fallen with the U.S. recession and rising
Chinese competition. More than two hundred plants closed last year, and
hundreds of thousands of jobs were lost.

TABLE 1
Mexico's Maquiladora Industry Today

                                          PLANTS     EMPLOYEES

Food-related products                          71        9,459
Clothing, textile products                    886      226,033
Shoe, leather products                         42        6,642
Furniture, wood & metal products              349       53,583
Chemical products                             142       23,315
Assembly of transport equipment               256      226,382
Assembly/repair of tools, machinery            61       16,427
Assembly of electrical articles               168       86,230
Electric, electronic parts, materials         533      236,846
Assembly of toys, sports items                 49       10,438
Services                                      229       36,300
Other                                         502      128,826
Total                                       3,288    1,060,481

Source: After Economist Intelligence Unit, Business
Latin America, based on Instituto Nacional de
Estadistica, Geografia e Informatica, 2002.

As Mexico was changing, China was changing faster.

TABLE 2

Revealed Comparative Advantage of Mexico and China,
1995-2000

                                      SHARE OF WORLD EXPORTS (%)

SECTOR                       1996     1997     1998      1999     2000

Miscellaneous Chemicals
   Mexico                    0.46%    0.54%    0.71%    0.62%     1.02%
    China                    1.29%    1.48%    1.33%    1.38%     2.70%

Leather
   Mexico                    1.11%    1.01%    1.18%    1.42%     2.41%
    China                    1.99%    2.45%    2.88%    3.15%     7.34%

Manmade Woven Fabrics
   Mexico                    0.47%    0.42%    0.49%    0.92%     2.49%
    China                    7.51%    9.44%    9.45%    9.73%    21.31%

Machine Tools
  Mexico                     0.84%    1.28%    1.18%    1.38%     1.89%
   China                     4.63%    5.14%    5.49%    5.18%     8.96%

Combustion Engines
   Mexico                    4.99%    4.84%    4.96%    5.17%     8.81%
    China                    0.40%    0.42%    0.40%    0.57%     1.17%

Heating/Cooling Equipment
   Mexico                    2.04%    2.00%    2.49%    3.03%     5.46%
    China                    0.79%    1.12%    1.36%    2.00%     5.31%

Office Machines
   Mexico                    2.85%    2.69%    3.11%    2.40%     3.66%
    China                    8.24%    9.63%    9.83%   10.31%    19.42%

Computer Equipment
   Mexico                    2.02%    2.50%    2.98%    4.05%     9.59%
    China                    2.77%    3.56%    4.75%    5.02%    12.96%

Sound/TV Recorders, Etc.
   Mexico                    2.20%    2.57%    2.75%    3.57%     4.15%
    China                    5.97%    7.21%    7.80%    8.86%    16.78%

Electrical Transmission Equipment
   Mexico                    5.96%    6.38%    8.12%    8.88%    16.49%
    China                    7.51%    8.57%    9.88%   11.17%    22.10%

Passenger Cars
   Mexico                    3.96%    3.77%    3.99%    4.28%     7.80%
    China                    0.01%    0.01%    0.01%    0.00%     0.01%

Motor Vehicle Parts
   Mexico                    2.46%    2.74%    3.37%    3.90%     7.23%
    China                    0.32%    0.36%    0.43%    0.60%     1.41%

Motorcycles
   Mexico                    0.44%    0.54%    0.82%    0.97%     0.84%
    China                    6.11%    7.28%    7.70%    9.03%    17.85%

Furniture
   Mexico                    2.81%    3.55%    3.51%    4.09%     8.60%
    China                    3.94%    5.02%    5.38%    6.19%    11.89%

Medical Instruments
   Mexico                    3.32%    3.85%    4.14%    4.42%    11.32%
    China                    1.19%    1.27%    1.39%    1.45%     3.89%

Meters and counters
   Mexico                    3.16%    7.99%   11.76%   16.57%    30.64%
    China                    1.96%    2.35%    2.42%    2.43%     7.29%

Photographic Equipment
   Mexico                    1.06%    1.32%    2.08%    2.32%     3.83%
    China                    6.83%    8.79%    9.98%    9.50%    14.17%

Source and clarification: Author's calculation based on UNCTAD ITC
database and COMTRADE database. Year 2000 figures are inflated
due to incomplete reporting of world export data. Figures accurately
depict relative position of Mexico to China, but since national
export data and world data are from different series, absolute
values may be imperfect.