Pedro Noyola July 2015 Index A. Openness B. Integration and - - PowerPoint PPT Presentation

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Beyond NAFTA: Framing the Future Landscape of the North American Economy Pedro Noyola July 2015 Index A. Openness B. Integration and Competitiveness C. Competition and Transparency D. The Future: Framing the Paradigm 2 Trade

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Beyond NAFTA: Framing the Future Landscape of the North American Economy

Pedro Noyola July 2015

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Index

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A. Openness B. Integration and Competitiveness C. Competition and Transparency D. The Future: Framing the Paradigm

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Source: SAI Law & Economics with data from INEGI.

Trade liberalization in Mexico

Degree of trade openness (X+M/GDP, 1981 - 2012)

Yt= α1 DGATT/PSE + α2 DNAFTA + α3 DEUFTA + AR(1) + MA(1)+MA(4) + ut

Dependent variable: Annual variation of trade openness Variable Coefficient

Std. Error

t-Statistic P value Dummy 1986-1987*GATT/PSE 0.04734 0.02707 1.74853 0.09260 Dummy 1994-1995**NAFTA 0.11561 0.01980 5.83892 0.00000 Dummy 2000-2001EUFTA

0.01480

0.01558

0.95014

0.35110 AR(1) 0.83738 0.14219 5.88911 0.00000 MA(1)

1.08588

0.02497

43.48797

0.00000 MA(4) 0.37436 0.01526 24.52906 0.00000

GATT NAFTA OECD FTA BOLIVIA FTA COSTA RICA --FTA, FTA G3 FTA URUGUAY FTA JAPAN PSE FTA PERU -- FTA CENTRAL AMERICA FTA CHILE EUFTA -- FTA ISRAEL FTA AELC

0% 10% 20% 30% 40% 50% 60% 70% 80% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Closed Economy

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Index

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A. Openness B. Integration and Competitiveness C. Competition and Transparency D. The Future: Framing the Paradigm

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Source: Koopman et. al. (2011) “Give credit where credit is due: tracing value added in global production chains”, U.S. Department of Commerce andAlix Partners, “Costs and Complexity - Will China Remain the Low-Cost Country of Choice?”.

Shared production

40% 25% 32% 4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Mexico Canada Weighted average (Mex-Can) China

“Pure”

utsourcing

U.S. Content in U.S. imports (percentage) Production sharing (intra-industry trade: 40%)

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* Rejects the null hypothesis with a confidence level of 95%. **Rejects the null hypothesis with a confidence level of 99%. 1/ The test assumes a deterministic linear trend of data. Source: Analysis by SAI Law & Economics with data from INEGI and the US Federal Reserve.

Manufacturing production from Mexico and the Unites States (annual growth,1981:T1-2013:T1)

Johansen Cointegration test1

1994:T1 – 2012:T2 1980:T1 –1993:T4

0% 5% 10% 15% 1981/01 1982/01 1983/01 1984/01 1985/01 1986/01 1987/01 1988/01 1989/01 1990/01 1991/01 1992/01 1993/01 1994/01 1995/01 1996/01 1997/01 1998/01 1999/01 2000/01 2001/01 2002/01 2003/01 2004/01 2005/01 2006/01 2007/01 2008/01 2009/01 2010/01 2011/01 2012/01 2013/01 US Mexico Corr: 0.21 Corr: 0.76

Johansen cointegration since Jan-94

Cycle coordination

Critical Value Critical Value 5% 1% 0.115693 8.516043 15.41 20.04 None 0.034156 1.876684 3.76 6.65 At most 1 Series: LOG(Man.Prod.MEX) LOG(Ind.ProdUSA) Likelihood ratio Cointegrating Equations Eigenvalue Critical Value Critical Value 5% 1% 0.174543 16.594320 15.41 20.04 None * 0.031910 2.399811 3.76 6.65 At most 1 Eigenvalue Series: LOG(Man.Prod.MEX) LOG(Ind.ProdUSA) Likelihood ratio Cointegrating Equations

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Labor force, from 15 to 64 years (accumulated annual change)

60 40 20 20 40 60 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100+

Millions

NAFTA population (2012) China population (2012)

0% 5% 10% 15% 20% 25% 30% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2030 2040

NAFTA China Source: SAI Law & Economics with data from U.S. Census Bureau and National Bureau of Statistics of China.

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Demographic competitiveness

20 10 10 20 0-4 5-9 10-14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85 - 89 90 - 94 95 - 99 100+

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Source: SAI Law & Economics with data from The International Energy Agency.

Additional investment to reach 450 Scenario (% of GDP)

The 450 Scenario analyzes different measures to bring energy related CO2 emissions down to a trajectory that would be consistent with ultimately stabilizing the concentration of all greenhouse gases in the atmosphere at 450 particles per million.

0.3% 0.5% 0.8% 1.2%

0.4% 0.8% 1.5% 2.0%

0.0% 0.4% 0.8% 1.2% 1.6% 2.0% 2.4% 2015 2020 2025 2030

NORTH AMERICA CHINA

Green competitiveness

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Index

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A. Openness B. Integration and Competitiveness C. Competition and Transparency D. The Future: Framing the Paradigm

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Concentration

1,641 1,502 1,157 1,659 1,623 3,189 753 2,347 1,666 1,983 2,172 4,152 5,559 7,998 8,032 10,000

2,000

4,000 6,000 8,000 10,000 Banking Construction Airline Transportation Media Telecom Electric Oil

Sectoral Herfindahl Index

Mexico United Sates

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Concentration

7,130 2,060

1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 Mexico United States

Aggregate Herfindahl Index

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Government procurement auctions

Through February 2015 Total

CFE IMSS PEMEX SEP

Processes 64

6 49 6 3

Line Items 673

25 523 110 15

Auctions 995

25 876* 79 15

Spend (Million USD) 8,412

4,306 3,515 339 252

Benefits (Million USD) 879

453 271 155 76

Average Savings (%) 10%

11% 7% 46% 23%

Adjudication Rate (%) 94%

96% 91% 99% 100%

Average Number of Bidders 5

7 3 7 8

ROI 271

453 54 298 139

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Index

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A. Openness B. Integration and Competitiveness C. Competition and Transparency D. The Future: Framing the Paradigm

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1/ Interagency Trade Enforcement Center. 2/ 64+ age population/ labor force population (15-64 age). e/ Estimated. Source: SAI Law & Economics with data from U.S. Census Bureau and National Bureau of Statistics of China..

Intra-regional affairs

Intra-regional

Market access Dumping + ITEC1 vs. common competition policy (Chapter 15) Seamless borders and transportation North America Logistics Program Energy synergies North American Energy Program Labor mobility vs. migration North American Labor Agreement

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Country Ratio2 Mexico 10.06 US 19.76 Canada 23.17 NAFTA 17.66

2012 Dependency ratio

Country Ratio2 Mexico 17.45 US 32.10 Canada 41.40 NAFTA 28.85

2030e/ Dependency ratio

Dependency ratios

2012: NAFTA 11% smaller than that of the

United States

2030e: NAFTA 10% smaller than that of the

United States

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Extra-regional affairs

Extra-regional TPP Preservation of NAFTA for trade and investment flows from North America TTIP Regional negotiation vs. convergence

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Shaping the future: a North American customs union

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Key issues

A. Common tariff and revenue sharing (Chapter 5) B. Energy (Chapter 6) C. Agricultural and industrial standards (Chapters 7 and 9) D. Government procurement (Chapter 10) E. Trade in services (Chapters 12 to 14 and 16) F. Trade remedies and competition policy (Chapters 15 and 19) G. Labor mobility