Chinese Imports and their Impact on the Spare Auto Parts Market in Mexico
Lourdes Álvarez and Liliana Cuadros
MEXICO-CHINA TRADE ( ...continuation )

Martínez (2010) also proposes economic association agreements for eliminating obstacles and increasing cooperation in the chapters of the Import and Export General Tariff Act (Tarifa de la Ley de Impuestos Generales de Importación y ExportaciónTIGIE) corresponding to more active trade. This would signify promoting new trade mechanisms for preferential access, and avoiding unfair practices and smuggling, while creating structures for resolving disagreements before reaching the point of confrontation, when it is necessary to use mechanisms for resolving disputes.

In addition triangulation and illegal imports of Chinese goods are problems for producing companies. Triangulation generates large discrepancies between a country's export statistics and the reciprocal import statistics. This takes place because “exports are almost always registered in the country of destination without the possibility of determining if, in the future, the goods are re-sold and re-exported to one or various countries. In the other direction, imports are registered according to the country of product's origin without considering the country of export, and they may not be the same” (Morales, 2008).

When Chinese products enter the United States as temporary imports, and are then re-exported to Mexico with the label “made in the USA,” Mexico faces a triangulation (Dussel, 2005; Morales, 2008 and 2010). Massive triangulation of Chinese goods has occurred by way of US ports, especially Long Beach (Dussel, 2010b). This benefits some foreign intermediary companies, but is detrimental to the relationship between Chinese and Mexican companies. For example, in 2007 a total of 942.7 million dollars of Chapter 87 harmonized system goods (motor vehicles, tractors, cycles and other land vehicles; their parts and accessories” were re-exported from the United States to Mexico, representing .07% of Mexico's Chapter 87 imports that year (Morales, 2008).

Mexico and China have placed little importance on identifying and promoting market opportunities, and have placed their attention on seeking measures for fighting against unfair trade practices, use of subsidies, and smuggling of Chinese merchandise (Villalobos, 2007). Nevertheless, during the last three years, tariffs have diminished: 91.7% of imports enter the country without payment of tariffs, 58% of the tariff classifications had a zero rate in 2010, and those for which tariffs applied, had an average tariff of 5.3% (Martínez, 2010). It is hoped this will contribute to decreasing smuggling and some unfair trade practices.

In effect, the trade opening continues to reduce tariff barriers, but the situation is not the same for all products or all countries. Dussel (2010b) studied five sub-headings in the automotive-auto parts chain, and found no import tariffs for the countries with which Mexico has a free trade agreement. In contrast, China, for which no preferential tariff exists, paid a 5% tariff in ten sub-headings for auto parts, and the tariff for new autos (1500 or 3000 cm3 cylinder vehicles for transporting persons) was between 30 and 50%. This tariff for new autos and for countries with which Mexico has no trade agreement will diminish to 20% on January 1, 2012.

Mexico's automotive industry and Chinese imports

The automotive industry in Mexico became an export platform when the North American Free Trade Agreement was signed in 1994, and from that point until 2008, it experienced a growth rate of 91.6%, with an increase from 1 to 2.1 million units produced. In 2009 auto production dropped 28% and the auto parts sector lost 29% of production, with a reduction from 53,100 to 41,227 million dollars (INA, 2009). The following year was marked by a significant recuperation, and auto production grew 52% with respect to 2009, and 14.4% with respect to 2008, reaching a level of 2.2 million vehicles, which is its highest point of production (AMIA, 2010; 2011). The auto parts sector also increased its production to 60,000 million dollars (45.55%) with respect to 2009 (INA, 2008, 2009 and Ríos, 2011).