Global Value Chains in Mexico: A Historical Perspective

This paper performs a historical analysis of Mexico's insertion into Global Value Chains (GVCs) and links it to the notion of competition underlying traditional theoretical models of international trade. In contrast with existing studies, it uses both new analytical tools pertaining to the GVC literature and tools based on the traditional notion of comparative advantage. This combination allows identifying three periods: (i) since NAFTA's signature until 2001, Mexico deepened its insertion into GVCs and reallocated resources to the production of more skilled-intensive goods; (ii) this higher GVC participation vanished when China entered the WTO; and (iii) since the second half of the 2000s, Mexico recovered the ground lost due to higher integration in the automotive sector and a reallocation of resources to the production of more unskilled-intensive goods, likely generated by an efficient response to competition with China. Hence, Mexico used two different models of GVC insertion entailing production processes with different characteristics in terms of skill-usage.