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News Analysis: Mexico Becomes Main Obstacle to China
Mexico manufactures T-shirts for US$1. China can make them for 20 cents. Mexico produces tennis shoes for US$38. China beats the price again, selling a pair for US$13.
Mexican manufacturers feel they can't win against China's prices. Now, as China nears the end of a 15-year fight to join the World Trade Organization, they seem to have the upper hand.
Mexico has emerged as one of China's biggest and most unlikely obstacles to joining the organization that sets rules on international trade. It is the only WTO member that hasn't reached a bilateral trade pact with China, possibly holding up the Asian country's WTO entry.
That Mexico has been China's toughest negotiator is surprising, said Tom Byrne, a lead analyst for China and East Asia at New York-based Moody's Investors Service. Mexico is a relatively small trading partner with China, unlike the United States and Japan.
``This has actually dragged on longer than I thought it would,'' Byrne said. ``Once China had a bilateral agreement with the United States, I thought it was a slam dunk.''
Both Mexico and China strongly disagree about tariffs on Chinese products like footwear and textiles. The Mexican government wants them extended for eight years; China has reportedly suggested three.
China began liberalizing prices in the 1980s as it gradually shifted from central planning to a market-driven economy, and its economy has greatly expanded in the past two decades. The country began sending goods to Mexico in the early 1990s, Mexican manufacturers say.
They claim they can't compete with the low wages Chinese producers enjoy. And they want to maintain tariffs, some more than 1,000 percent, for 15 years to give themselves time to find ways to become competitive.
Right now, they argue, China sends shoes, toys, fabric and clothing at rock-bottom prices, shipping the products to Panama or California and then importing them into Mexico. Often, manufacturers say, the products falsely claim to be made in the United States to avoid tariffs.
Although Mexico originally said it would not block China's membership even if a bilateral deal fell through, other WTO members will likely want to know the details of the deal with Mexico before approving Beijing's WTO entry.
Under the WTO system, a deal reached with one nation has to be offered to all 141 members.
China would like an agreement soon. Final approval of its WTO entry could come during a high-level conference of ministers in Doha, Qatar, scheduled for November.
Mexican and Chinese officials plan at least two meetings to discuss the bilateral pact. Mexican Economy Secretary Luis Ernesto Derbez says talks have been ``tense, but cordial.''
``We are getting closer to an agreement,'' he told reporters earlier this month.
Still, even an agreement to maintain tariffs may not be enough. Mexican textile producers have been hurt by the US economic slowdown, losing 5,000 jobs in the second quarter of the year. Production also fell nearly 10 percent, partly because of increased imports from China, Ambriz said.
Chinese goods -- everything from socks to toys -- can usually be found on street vendors' makeshift tables, although some make their way into discount chains like Wal-Mart, Ambriz said.
The onslaught of Chinese goods has also hurt Mexican manufacturers' exports as Mexico's No.1 trading partner, the United States, looks for its own bargains.
Mexican manufacturers are trying to improve production, seek out specialty markets and respond faster to market needs in an effort to compete -- but that will take time.
Derbez has also indicated that Mexico would like to increase exports to China but has complained that cultural and language difficulties have held up talks.
The biggest fear in Mexico is that things will only get worse before they get better. While China may not be a big player here on paper, that could change, said Jose Carlos Gutierrez, president of the Chamber of Shoe Manufacturers in Guanajuato state.
Source: chinadaily.com.cn
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