Textiles and apparel in NAFTA : a case of constrained liberalization

The authors examine the changes that Mexico's textile and clothing industry is likely to face under the North American Free Trade Agreement (NAFTA). They compare pre-NAFTA and probable post-NAFTA scenarios for Mexican exports. The U.S. clothing and textile industry is likely to remain among the most protected of U.S. industries, so this is essentially a comparison of two protectionist situations, not of protection and free trade. The authors trace how current quota and tariff restrictions on U.S. imports from Mexico will be replaced by rules of origin designed to protect U.S. industry. Mexican textile and clothing exports will enjoy greater access to the U.S. market if most inputs originate in North America. Under the triple transformation requirements, for example, a cotton shirt would have to be made in the NAFTA region from yarn and fabric of NAFTA origin. Mexican compliance with this rule would not prove onerous. Proximity and long-standing production-sharing arrangements have made Mexico heavily dependent on U.S. inputs. Roughly 53 percent of Mexican textile and apparel exports to the United States fall under production-sharing programs, with an average 69 percent of value added of U.S. origin. Only 15 percent of input requirements for the other 47 percent of trade is imported into Mexico - only 8 percent from non-NAFTA countries. What about future trade? The authors estimate that these Mexican exports to the United States will increase only modestly - partly because of the low level of protection already associated with production-sharing arrangements. Rules oforigin under the NAFTA are small. How much investment from outside North America will be attracted to Mexico under stringent input-sourcing requirements is open to question. The competitiveness of Mexico's apparel industry in non-NAFTA markets will depend to some extent on the international competitiveness of the U.S. textile industry.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Environmental Economics&Policies,Textiles, Apparel&Leather Industry,Trade Policy

Policies for Industrial Learning in China and Mexico: Neo-developmental vs. Neo-liberal approaches

Abstract Previous work has shown that the results of both China and Mexico’s export-led market reforms over the past quarter century have been strikingly different. In contrast to China, Mexico has not managed to increase the value added of its exports of manufactured goods and has subsequently had a difficult time competing with China in world markets. Building on this previous work, in this paper we conduct a comparative analysis of the role of government policies in industrial learning and the development of capabilities of indigenous firms in Mexico and China in order to shed light on why China is so outperforming Mexico. We find that Mexico and China have had starkly different approaches to economic reform in this area. Mexico’s approach to reform has been a “neo-liberal” one, whereas China’s could be described as “neo-developmental.” Mexico’s hands-off approach to learning has resulted in a lack of development of endogenous capacity of domestic firms, little transfer of technology, negligible progress in the upgrading of industrial production, and little increase in value added of exports. By contrast, China has deployed a hands-on approach of targeting and nurturing domestic firms through a gradual and trial and error led set of government policies.International trade, development, competitiveness, value added, government policy, assembly operations

North American free trade agreement : issues on trade in financial services for Mexico

To maximize the efficiency gains from the North American Free Trade Agreement (NAFTA), the regulatory environment for Mexican banking, insurance, and securities markets should be further harmonized with those of the more advanced and efficient Canadian and U.S. markets. The authors argue that a prerequisite for NAFTA's success is to remove regulatory distortions and to eliminate opportunities for regulatory arbitrage. Moreover, eliminating or reducing disparities between the NAFTA countries'tax rates and ways of levying taxes would help prevent distortions, tax evasion, and tax avoidance. Complete harmonization may not be feasible or even desirable, given the way the three countries'financial systems have evolved and the differences between their industrial structures and stages of economic development. In banking, insurance, and securities markets, the main free trade issues are the convergence of authorization criteria and the removal of most of the obstacles to freedom of establishment. It is also important to harmonize guarantee schemes and to create well-defined Mexican schemes to protect small, unsophisticated investors rather than mismanaged institutions. The key to NAFTA's success in the financial sector will be effective prudential regulation and supervision - particularly because of the heavy financial pressures on the newly privatized banks and the financial groups that own them. Without effective supervision, the new owners of the banks may take excessive risks to recoup the substantial element of goodwill in the privatization price, before the protection from foreign competition and new entrants is phased out. An integrated market will presuppose greater cooperation and information exchange among the national regulatory authorities to ensure, for instance, that weak banks do not undermine credit standards and that weak insurers do not offer deceptively low-priced policies. In these areas, Mexico needs intensive training and cooperation with the Canadian and U.S. regulatory authorities. To increase the contestability of the financial markets and benefit from the transfer of financial technology, the Mexican financial system should be opened to foreign entry. But Mexico needs to modernize its financial institutions and the authors conclude that the proposed NAFTA should allow for a gradual approach to foreign entry. A reasonable transition period, extending up to the year 2000, will give Mexican institutions ample time to achieve the efficiency gains that motivated the quest for the agreement in the first place.Banks&Banking Reform,Financial Intermediation,Economic Theory&Research,Environmental Economics&Policies,Financial Crisis Management&Restructuring

Capturing NAFTA's impact with applied general equilibrium models

We examine the results of four static applied general equilibrium (AGE) modeling teams' analyses of the effects of NAFTA. What they show is that Mexico's economy, because it's the smallest, will see the biggest NAFTA-produced increase in economic welfare: from 2 to 5 percent of GDP. The U.S. welfare increase will be small, around 0.1 percent of GDP; Canada will notice no welfare increase due to NAFTA. We then discuss two examples of dynamic phenomena—labor force adjustment and capital flows—which are likely to influence NAFTA's welfare impact, but that aren't easy to incorporate into static AGE models. Early results indicate that this is an important direction for future study.North American Free Trade Agreement

Labor Market Effects of Trade and FDI: Recent Advances and Research Gaps

This paper pursues three aims. First, we provide a review of current theoretical advances which pertain to the relationship between trade, FDI and labor markets. We do so under the following (not mutually exclusive) headings: (1) slicing-up the value added chain and the turn to a task-based approach, (2) firm heterogeneity and labor markets, (3) complex offshoring (integration) and sourcing strategies and (4) location of firms and labor markets. Second, we overview existing empirical work covering the labor market effects of trade and FDI. Finally, we identify and summarize the existing research gaps and thereby we highlight promising avenues for future research.offshoring, outsourcing, FDI, trade, labor markets, agglomeration

Globalization and workers in developing countries

Stories on the positive and negative effects of globalization on workers in developing countries abound. But a comprehensive picture is missing and many of the stories are ideologically charged. This paper reviews the academic literature on the subject, including several studies currently under way, and derives the implications for public policy. First, it deals with the effects of openness to trade, foreign direct investment, and financial crises on average wages. Second, it discusses the impact of exposure to world markets on the dispersion of wages by occupation, skill, and gender. Third, it describes the pattern of job destruction and job creation associated with globalization. Because these two processes are not synchronized, the fourth issue addressed is the impact on unemployment rates. Fifth, the paper reviews the labor market policies that can be used to offset the adverse effects of globalization on employment and labor earnings. Finally, it discusses how the international community could encourage developing countries to adopt sound labor market policies in the contextof globalization.Labor Policies,Public Health Promotion,Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Banks&Banking Reform,Health Monitoring&Evaluation

Regional integration and foreign direct investment : a conceptual framework and three cases

The authors discuss how regional investment agreements may affect the inward and outward flows of foreign direct investments in the integrating region. After describing the multidimensional character of the issue, they provide a conceptual framework for analysis as well as three case studies focused on different kinds of regional integration: (1) North-North integration (Canada joining the CUSFTA); (2) North-South integration (Mexico's accession to NAFTA); and (3) South-South integration (MERCOSUR). They conclude that the response to an integration agreement will, in each case, depend on the environmental change brought about by the regional investment agreements, the locational advantage of the country or region, the competitiveness of local firms in the integrating region, and the motives for foreign direct investment in and by the country or region in question. The creation of the Canada-U.S. Free Trade Agreement (CUSFTA), for example, had relatively little influence on direct investment patterns in Canada, since much of the trade between Canada and the United States had been liberalized long before the CUSFTA was established. By contrast, the Mexican accession to NAFTA brought about significant policy changes, which helps to explain foreign multinationals'increasing interest in the country. Similarly, the establishment of the MERCOSUR Common Market is likely to significantly affect the region's policy environment, which suggests that it may have a notable (although varying) impact on foreign direct investment in the four member countries.Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism,Payment Systems&Infrastructure,Labor Policies,Trade and Regional Integration,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,International Terrorism&Counterterrorism

The Liberalism of Financial Services in Mexico and Its Relation with NAFTA, MEFTA and GATS

Social media and their growing role in tourism are increasingly becoming a topic of research. From searching information for decision making, social media play an important role in many aspects, especially as a tool that hotel accommodation facilities can use to promote itself in the tourist destination. Social media today are increasingly used as a means of communication between individuals, and this with the emergence of social media disrupts the traditional model of services for tourists, especially in the hospitality industry. It’s important to note that communications in the virtual world are very fast and news are spreading faster than in any form of communication on the Internet. It is no longer necessary for tourists to wait, to communicate physically so that they can understand the current situation of the hotel accommodation facility in the tourist destination. Social media being part of the digital technology that now connects tourists with the opinion and recommendations of millions of people, including friends on their social networks and common travelers with similar opinions that they never actually met. With most hotels being dependent on “word of mouth “, which with the advent of social media has spread beyond from a limited group to the whole world, and good reviews from loyal guests, makes the social media a tool for marketing promotion and branding in the tourist destination and on the tourism market. The use of social media has become widespread, and tourists are constantly using social media to express satisfaction or frustration for their experiences, were based on their experience expresses on social media, other potential tourists will determine their travel plans for their holiday. Communicating with consumers is the key to business success. However, although this can be said for any business, this is particularly true within the hospitality industry. Hoteliers and hotel accommodation facilities should embrace the new ways in which tourists interact and be prepared for changes in tourist’s behavior, they must not ignore the impact of this phenomenon in their business. By keeping up with social media development trends and developing a dynamic online presence, hotel accommodation facilities can quickly adapt, promote and gain the advantage of attracting tourists in the tourist destination