TY  - JOUR
AU  - Javorcik,Beata Smarzynska
AU  - Keller,Wolfgang
AU  - Tybout,James R.
TI  - Openness and Industrial Responses in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12457
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12457
L1  - http://www.nber.org/papers/w12457.pdf
N1  - Author contact info:
Beata Smarzynska Javorcik
University of Oxford
E-Mail: beata.javorcik@economics.ox.ac.uk

Wolfgang Keller
Department of Economics
University of Colorado-Boulder
Boulder, CO 80309-0256
Tel: 303/735 5507
Fax: 303/492 8960
E-Mail: Wolfgang.Keller@colorado.edu

James R. Tybout
Department of Economics
Penn State University
517 Kern Graduate Building
University Park, PA  16802
Tel: 814/865-4259
Fax: 814/863-4775
E-Mail: jtybout@psu.edu
AB  - This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of  NAFTA and the GATT on the SDS industry was to help induce Wal-Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labor-shedding and from innovation, which in turn was fueled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the U.S. detergent market over the past decade, Mexican sales in the U.S. were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re-tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non-Latin consumers, and in order to comply with zero phosphate laws in many regions of the United States.
ER  -