U.S. Manufacturing and an Emerging Mexico

This paper offers a vision of the future of trade in manufactured products between Mexico and the United States. This vision is formed from a study of the 1970 and 1985 trade patterns of OECD countries. The vision accounts directly for the proximity of Mexico and the United States, and also for the continuing wage gap between Mexico and the United States. The vision accounts indirectly for the declining level of trade barriers and for the technological improvements that are probable in a liberalized Mexico. Based on the OECD trade patterns, an emerging Mexico will present U.S. export opportunities that are a significant fraction of current U.S. production of transportation equipment, chemicals and machinery. But Mexican exports are likely to displace a substantial amount of U.S. production of apparel, footwear, pottery and leather products. This vision which is formed using 1985 data does not offer an entirely accurate description of the changes in trade between Mexico and the United States that have occurred between 1985 and 1992. It is possible that the vision is defective, but it is also possible that the Mexican liberalization is incomplete, is in its infancy, and is still under serious threat of reversal.