Trade Liberalization and Intra-Industry Trade: The Case of the U.S. and MexicoGlobal Economy Quarterly (2001)
AbstractThis paper investigates how U.S.-Mexican intra-industry trade (IIT) has evolved since the creation of the NAFTA beginning in 1994. These empirical findings are of value not only for the study of the U.S.-Mexican trading relationship, but they also contain several important conclusions applicable more generally to the study of the theoretical basis for intra-industry trade and its empirical estimation. The basic conclusions of this study are: 1) Unlike the European experience after the creation of the European Common Market, and most other regional trade arrangements, trade between the U.S. and Mexico has remained mostly inter- industry trade, and the growth of trade has been largely inter-industry as measured by both IIT indexes and marginal intra-industry trade (MIIT) indexes. 2) Also, unlike most studies of IIT using European countries, the IIT and the MIIT indexes are highly correlated across sectors. 3)The fall in the IIT indexes since NAFTA is due significantly to Mexico's trade surplus with the U.S. 4) The IIT and MIIT indexes at a sectoral level are significantly related to the duty treatment of U.S. imports; the higher the percentage of imports entering duty-free, the higher the IIT and MIIT indexes, and the higher the actual ad valorem duty rate, the lower the IIT and MIIT indexes. 5) There is significant "smoking gun" evidence that the U.S.- Mexico IIT that does exist is not typical IIT but is significantly composed of the U.S. re-import of U.S. components within the same sector; the percentage of U.S. components in the value of U.S. imports by product, is significantly related to the IIT and MIIT indexes even at the most extensive level of product disaggregation. In addition, a new graphical measure for IIT is proposed which is better able to describe the level of IIT.
- Intra-Industry Trade,
- U.S. Trade,
Publication DateSeptember, 2001
Citation InformationRobert C. Shelburne. "Trade Liberalization and Intra-Industry Trade: The Case of the U.S. and Mexico" Global Economy Quarterly 2.3 (2001): 215-234. Available at www.degruyter.com