Over the past 20 years, Mexico has transformed itself into a manufacturing-for-export nation. Exports now represent 30 percent of its GDP, up from 10 percent 20 years ago. The vast majority of Mexico’s exports are manufactured goods, and almost 90 percent of them are shipped to the United States.

      But these days Mexico appears to be losing ground in U.S. markets. Its share of U.S. imports peaked at 11.5 percent in 2001 and has slipped since then. Meanwhile, China’s share of U.S. imports has grown steadily and now exceeds Mexico’s. To Mexican officials and producers, China’s advance and Mexico’s slide are no coincidence. China’s gains, they say, are being made at Mexico’s expense.

      Mexico has good reason to worry about China. Both nations emphasize manufacturing exports, and China’s export sector is growing at a mind-boggling rate. China’s exports-to-GDP ratio has risen from 2 percent to 25 percent since 1970. While China’s GDP has grown at about 10 percent a year in real terms over the past 20 years, exports have grown twice as fast. Not only is China producing more than ever for export, its access to U.S. markets is improving. This is especially true in the textile sector, where quotas on some Chinese goods are slated to expire in 2005.

      Yet another reason for Mexico to worry is China’s abundance of unskilled labor. Foreign manufacturers invested in Mexico in the first place because of its comparative advantage over industrialized nations in labor-intensive sectors. China seems the logical next stop for some of these manufacturers. And some have already made the move. However, there is no official tally of how many plants have moved, how many jobs have been lost in the process or, for that matter, how many jobs have come back when the grass in China proved less green than expected.

            Nevertheless, Mexico’s anxiety about China is understandable. But is it justified? Is China the problem? If China is the reason for Mexico’s slide in the U.S. market, industries in which Mexico is losing ground should be industries in which China...

 ...Continued in the pages of Twin Plant News, Subscribe Today!