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The US-Mexico bilateral trade relation through a value added lens

Armando Aguirre Castro and Diego Cardozo-Medeiros

No 2020-08, Working Papers from Banco de México

Abstract: We use the World Input-Output Database and build on Wang et al. (2013) gross exports decomposition to analyze the bilateral trade relation between Mexico and the United States from a value added perspective. Once we take into account that gross commercial flows are clouded by failing to account for imported content, we find that contrary to what gross flows suggest, Mexico has a value added commercial deficit in manufacturing with the United States. Similar patterns can be observed at the sectoral level with significant differences between the gross and value added sectoral trade balances: an improvement of most sectoral US trade balances, particularly for those sectors importing significant amounts of intermediate goods.

Keywords: Global value chains; World input-output tables; International fragmentation of production; Trade imbalances (search for similar items in EconPapers)
JEL-codes: E1 F14 F15 F2 F23 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-hme and nep-int
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Handle: RePEc:bdm:wpaper:2020-08