The Comparative Analysis On Processing Trade Between China And Mexico

With the further development of international specialization and production internationalization, processing trade plays a vital role in the world especially in developing country. Above all, many developed countries transfer low value-added processing operation from home country to some developing country. China and Mexico as the typical country in undertaking processing trade, there are many similarities in processing trade’s development history:The two countries’ background are very similar and processing trade is growing rapidly; Absolute advantage position have been occupied by foreign company which is carried out by Multinational corporation in China and Mexico; the Export similarity index of high-tech commodities exported to America is very high, so there is a fierce competition between the two countries; in addition, the two countries’development of regional processing trade is imbalance. However, there are many distinctive differences in processing trade structure under the comparative analysis of this paper: Except America, China’s major export markets in Asian countries and EU, on the other hand, Mexico’s major trade partner are China and Latin American countries; What important is that competitive advantage of major processing trade products is difference, especially reflected on mechanical and electricalproducts and vehicle and zero accessories products. Using comparative method and Combination of theory and practice, analysis similarities and differences of the two countries’processing trade from development history, structure, subject and so on. At last, put forward some policy suggestions to deal with processing trade shortages to China.Five chapters in all in my essay. The first part is introduction, mainly about the backgrounds and significance of the topic, the framework and methods of the research and literature review.The second part mainly introduced some related theories of processing trade, including conception of processing trade, traits, classify, generalization of processing trade’s emergence and development and reference for Theory of Comparative Advantage, Theory of Factor Endowment, Theory of Competitive Advantage and Smiling Curve. This part provided a sound theoretical basis for next parts’empirical analysis through introduce related-theory.The third part has compared processing trade procedure and achievements between China and Mexico, and provided background information for the next comparison. Relatively, it is very similar in procedure of processing trade between China and Mexico, governments’foreign policy plays an important role in the development of processing trade among China and Mexico. The export scale of manufactured product continuouslyextend,but the speed of China is faster than Mexico obviously, so the speed and scale of manufactured product in Mexico is inferior to China.As the core of this essay, in this part, we compare in many aspects of China and Mexico, such as export structure, assimilation of FDI, regional distribution, major player of processing trade etc. Apart America, their export partners are difference, EU and Asian countries are China’s partners, otherwise, Mexico’s partners are China and Latin American countries; in recent years, the variation trend of assimilate FDI is also difference, large range of FDI in Mexico, comparatively, the trend in assimilation of FDI in China is almost increase by years; foreign companies’ processing trade play an important role in China and Mexico. At last, there is very distinctive competitive advantages in China and Mexico’s major export commodities, this paper mainly compared mechanical and electrical products and vehicle and zero accessories products which is the largest commodity exported from Mexico to America. The comparative advantage of mechanical and electrical products in China has catch up with Mexico, but in vehicle and zero accessories products, China is far lag behind Mexico.The last part in essay is conclusion. Each hasitsownmerits processing trade by comparing processing trade of China and Mexico, so each should learn from the other’s advantages, then provided some suggestions directed at shortages of processing trade in China and Mexico. This paper analysis comparative and competitive advantage of major export commodities in China and Mexico, meanwhile, we also use RCA index, TS Index and Export Similarity Index to compare. In this paper, We highlight the comparative research and analysis, and combines empirical and normative analysis, and use the related theory of economics and international trade.My essay’s innovation is that using comparative method to compare China and Mexico’s processing trade comprehensively. Using the latest data and combine related theories whit RCA and ESI to make overall comparison in competitiveness of mechanical and electrical products and vehicle and zero accessories products. Combined with knowledge we learned so that to reflect similarities and differences of processing trade between the two countries objectively.