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Damn clever those Chinese

2 May 2007

Mexico’s former Ambassador to the People’s Republic of China, Cecelio Garza Limon write in the Latin Business Chronicle that Mexico needs a China Policy.

The recent evolution of economic relations between Mexico and China brings considerable new challenges for Mexico. Mexico’s foreign trade has been its major engine of growth since the end of the 1980s, but this edge has been eroding, to a certain extent, as a result of China’s active integration into the world markets. The competition of Chinese products, in Mexico, the United States and other major markets, is an issue that affects Mexican development prospects.

In the early 1990s, when NAFTA was being negotiated, the Mexican negotiation team inadvertently placed Mexico within an economic strategy which was more Asian in nature than American. Mexico embarked in consolidating an export platform that ultimately assigned more importance to geographic advantage than to productivity. This put Mexican exports in a direct collision route with those that would be more effectively produced by the Chinese economy.

In 1994, few analysts understood the dire competition within NAFTA that would come from Chinese companies. Of course, the issue is not related to having opened Mexico’s borders to trade, but rather to failing to plan and foresee what it would mean to enter global competition without a broader strategy beyond North America.

At the onset of NAFTA, Mexico became an economy similar to China at the time: a kind of convenient platform for quick business returns. The Chinese realized this and they planned and acted in consequence, while Mexico continued opening its economy through an array of free trade agreements, but looking mainly toward the north.

China’s capacity to focus is amply evident. When I presented my credentials as Mexican Ambassador to China, President Jiang Zemín surprised me by telling me about his long stay in Mexico at the beginning of the 1980s. Neither our Embassy nor the Mexican Ministry of Foreign Affairs knew anything about this. As a prominent engineer, he was commissioned to analyze the border situation with the United States, between Ciudad Juárez and Tijuana, due to the unique similarities in asymmetries between countries with such different levels of development and the parallel between southern China and British Hong Kong. This analysis would later allow him to be in charge of building the new city of Shenzhen, which took into account the experience faced by the maquila cities of the northern border of Mexico.

Mexico needs to understand that export orientation is not sufficient for growth and development, particularly when based on a relatively cheap labor force. In the early 1990s, that condition allowed Mexico to integrate into the U.S. market through NAFTA. Currently, however, several Asian economies (including China) offer a cheaper labor force, but also long-term strategies and a variety of incentives for investors.

Jiang Zemín lived in TJ? WHOA! and I thought the stories about Chinese commies on the border were just updates of the Hearst publication’s old “yellow peril” hype.

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