Mexico, Brazil and Chile: potential links with China and South Korea
| Date | 03 October 2016 |
| Published date | 03 October 2016 |
| Pages | 190-212 |
| DOI | https://doi.org/10.1108/JCEFTS-10-2016-033 |
| Author | K.C. Fung,Hsiang-Chih Hwang,Jesús Seade,Rocky Tung |
| Subject Matter | Economics,International economics |
Mexico, Brazil and Chile:
potential links with China and
South Korea
K.C. Fung
Department of Economics, University of California, Santa Cruz,
California, USA
Hsiang-Chih Hwang and Jesús Seade
Department of Economics, Lingnan University, Hong Kong, China, and
Rocky Tung
University of Hong Kong, Hong Kong
Abstract
Purpose – In this paper, the authors aim to examine trade in parts and components of Mexico, Chile
and Brazil, focusing in particular on trade of television parts (SITC 7711) and semiconductors (SITC
7763) with China and South Korea. They also study the impact of foreign direct investment (FDI) on
supply chain activities.
Design/methodology/approach – The authors use sub-categories of trade data to look at export and
import of parts and components involving China, South Korea, Mexico, Brazil and Chile. They also use
two-stage regressions to examine the impact of FDI on supply chain trade.
Findings – The authors found preliminary evidence that there may be early signs of an emerging
Trans-Pacic production network between these three Latin American economies and the China-based
and South Korea-based East Asian supply chains. The authors argue that this budding network will
improve economic welfare. To deepen the Trans-Pacic supply chain, it would be desirable for China
and South Korea to consider joining the Trans-Pacic Partnership (TPP). In addition, FDI enhances
trade in components.
Practical implications – To deepen the Trans-Pacic supply chain, it would be desirable for China
and South Korea to consider joining the TPP. In addition, it would be benecial for these Latin American
economies to encourage more direct investment in infrastructure and in manufacturing facilities from
Asia.
Originality/value – This paper is one of the earliest research papers examining the Trans-Pacic
supply chain, linking China, South Korea with Mexico, Brazil and Chile. The authors also study the
impact of FDI on supply chain activities.
Keywords China, Brazil, South Korea, Mexico, Chile, Supply chains
Paper type Research paper
1. Introduction
This paper focuses on bilateral trade between three Latin American economies –
Mexico, Brazil, Chile – with two major East Asian economies: China, South Korea, as
well as with the USA. We will also discuss how much the three Latin American
economies have tapped into the East Asian production network. Beneted by an
export-led growth model that began three decades ago, China has become the “world
The current issue and full text archive of this journal is available on Emerald Insight at:
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JCEFTS
9,3
190
Journalof Chinese Economic and
ForeignTrade Studies
Vol.9 No. 3, 2016
pp.190-212
©Emerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-10-2016-033
factory” for manufactured goods. China is at the center of the East Asian production
network. It is also a key supplier for parts and components of many manufactured goods
for other regional supply chains (Garcia-Herrero et al., 2013,2015). Currently, China’s
manufacturing production has accounted for at least a fth of the total in the world
(Economist, 2012). As such, policymakers across many countries are eager to encourage
more cross-border trade and investment, ultimately hoping to deepen their participation
in the East Asian production networks[1].
The USA has long been Latin America’s biggest trade partner. However, China
has been increasing its market penetration rate in Latin America over the past 15
years. Currently, China and the USA are the two largest trade partners of Latin
America. Trade between Mexico and the USA has started to boom since the North
American Free Trade Agreement (NAFTA), which came into effect in 1994.
Currently, total volume of trade between Mexico and the USA remains the largest
compared to all the bilateral trade volumes we examine in this paper [Figure 1(a)].
0.00E+00
1.00E+11
2.00E+11
3.00E+11
4.00E+11
5.00E+11
6.00E+11
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
CHN-BRA
CHN-CHL
CHN-MEX
USA-BRA
USA-CHL
USA-MEX
0.00E+00
1.00E+10
2.00E+10
3.00E+10
4.00E+10
5.00E+10
6.00E+10
7.00E+10
8.00E+10
9.00E+10
1.00E+11
199219941996199820002002200420062008201020122014
CHN-BRA
CHN-CHL
CHN-MEX
USA-BRA
USA-CHL
Notes: (a) Total goods trade between CHN-BRA, CHN-CHL,
CHN-MEX, USA-BRA, USA-CHL and USA-MEX (in US$);
(b) Total goods trade between CHN-BRA, CHN-CHL,
CHN-MEX, USA-BRA and USA-CHL (in US$)
Source: UN Comtrade database
(a)
(b)
Figure 1.
Goods trade between
China, Brazil, Chile,
Mexico and the USA
191
Potential links
with China
and South
Korea
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