NAFTA and the Evolution of Mexico's Competitive Advantages in the US Market : A Value-Added Approach

Understanding your market and the value creation though your supply chain is a relatively young discipline. Thanks to new statistical indicators, it is now possible to conduct sectoral market analysis in value-added. This paper is an application to Mexico and the NAFTA. The objective of this conference paper is to map and characterize the various NAFTA Regional Value Chains, their evolution since the inception of NAFTA and identify the industries that are the most vulnerable to a disruption of the regional supply chain providing them with competitive inputs. To measure the vulnerability of Mexican industries to a disruption of the regional supply chain (the ultimate objective of the exercise), the paper estimates the impact on production costs on key manufacturing sectors that would be expected from a reversion of NAFTA under various hypothesis. When looking at the performance of Mexico in the US manufacturing market, the paper points at some substitution between Canada and Mexico as US supplier of inputs. It shows that, by supplying competitive inputs to the US manufacture exporters, Mexico and China helped the efforts of the US industry to remain competitive on the world market. This is in particular the case for the US automobile industry. The analysis of the sectoral origin of the value added embodied in Mexico's exports of manufacture to the US reveals also the low content of embodied business services in Mexican products. Considering that manufacture and business services are the main driver of competitiveness, this result is worrying. (This paper is the conference version of an article ultimately published in Spanish.)