遵循不同發展途徑:墨西哥台資與失衡的台墨貿易關係之探討 - 政大學術集成

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(1)國立政治大學社會科學學院亞太研究英語博士學位學程 International Doctoral Program in Asia-Pacific Studies College of Social Sciences National Chengchi University. 博士論文政治大立Doctoral Dissertation. ‧ 國. 學 ‧. 遵循不同發展途徑: 墨西哥台資與失衡的台墨貿易關係之探討. sit. y. Nat. n. er. io. Following Different Approaches: Taiwanese a l Investment in Mexico v and i Ch Unbalanced Taiwan-Mexico Trade U n Relations. engchi. Student: Fabricio Antonio Fonseca Fernández Advisor: Dr. Chung-chian Teng Co-advisor: Dr. Roberto Ren-Rang Chyou 中華民國 106 年 12 月 – December 2017 1.

(2) Doctoral Dissertation Committee Members Dr. Lucía Hsiao-chuan Chen 陳小雀教授 Dean – College of Foreign Languages and Literature Professor – Graduate Institute of Latin American Studies Tamkang University. Dr. Antonio C. Hsiang 向駿教授 Director – Center for Latin America Trade and Economy Studies (CEECAL) Professor – College of International Commerce Chihlee University of Technology. 立. 政治大. Dr. Francisco Luis Pérez Expósito 白方濟教授. ‧ 國. 學. Professor – Graduate Institute of Latin American Studies Tamkang University. Dr. Mei-Chuan Wei 魏玫娟教授. ‧. sit. y. Nat. Director – International Master’s Program in Asia-Pacific Studies (IMAS) Associate Professor – Graduate Institute of Development Studies College of Social Sciences, National Chengchi University. er. io. Dr. Chung-chian Teng 鄧中堅教授 (Supervisor) Professor – Department of Diplomacy College of International Affairs, National Chengchi University. n. al. Ch. i. i n U. v. e n g c (Co-supervisor) h Dr. Roberto Ren-Rang Chyou 邱稔壤教授 Dean – College of International Affairs Director – Center for Latin American Studies Professor – Department of Diplomacy National Chengchi University. 2.

(3) 遵循不同發展途徑: 墨西哥台資與失衡的台墨貿易關係之探討 Following Different Approaches: Taiwanese Investment in Mexico and Unbalanced Taiwan-Mexico Trade Relations. 研究生 : 馮慕文. 政治大. Student: Fabricio Antonio Fonseca Fernández 指導教授 : 鄧中堅教授. 學. Supervisor: Dr. Chung-chian Teng 共同指導教授 : 邱稔壤教授. ‧. ‧ 國. 立. Co-Supervisor: Dr. Roberto Ren-Rang Chyou. er. io. sit. y. Nat. al. n. 國立政治大學 iv n C hengchi U 亞太英語博士學位學程. 博士論文 A Dissertation Submitted as Partial Requirement to International Doctoral Program in Asia-Pacific Studies National Chengchi University. 中華民國 106 年 12 月 December 2017 3.

(4) 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 4. i n U. v.

(5) For Antonio and Gloria. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 5. i n U. v.

(6) Acknowledgements The completion of this dissertation has been a process not exempt from complications, both expected and unexpected, but there are many people who contributed to make it a very fruitful and rewarding experience. To all of them, I would like to offer my sincere appreciation and gratitude. First of all, I would like to thank Dr. Chung-chian Teng, for his invaluable expertise and advise, and most of all for his willingness and disposition, that were determinant in the elaboration of this thesis. Similarly, Dr. Roberto Ren-Rang Chyou, my co-supervisor, played a distinctively supportive role, not only in this research, but also in my professional training. 政治大. and career. I thank them both for the many opportunities of personal growth they have offered me throughout these years.. 立. I also thank the members of my dissertation committee, namely Dr. Lucía Hsiao-. ‧ 國. 學. chuan Chen, Dr. Mei-Chuan Wei, Dr. Francisco Luis Pérez Expósito, and Dr. Antonio C. Hsiang, whose comments and observations were immensely constructive, presenting me with ideas and questions to improve this thesis, and to think about future lines of research. I am. ‧. particularly grateful for the support, motivation and encouragement received from Dr. Hsiang. y. Nat. during these years, being also an influential figure during my Ph.D. journey.. sit. The professors and staff in IDAS were also an important part in this process. I would. er. io. like to thank former directors, Dr. Evan Berman and Dr. David Holm, for their continuous. al. n. iv n C Yin Kuan. I also thank my professorsh for the knowledge and e n g c h i U expertise shared with us during class, notable among them being Dr. Tuan Y. Cheng, Dr. Lin-Jun Wu, Dr. Byoung Se Cho,. interest and efforts to making the program a better place, as well as current director, Dr. Ping-. Dr. Chung-min Tsai, Dr. David Blundell and Dr. Tsai-wei Sun. My particular gratitude goes as well to Ms. Angel Li, Ms. Austen Wei, Ms. Julia Hou, and Ms. Valencia Cheng, for their administrative support, and their constant kindness and patience. The journey this dissertation entailed was also possible with the assistance of different institutions, including the Oficina de Enlace de México en Taiwán, where I am particularly grateful to former director, Martín de Jesús Muñoz Ledo Villegas, and its current director, Martín Torres Gutiérrez Rubio. My appreciation as well to the Taipei Economic and Cultural Office in Mexico, in particular its director, Carlos Liao, and Shaolin Hu, from the Economic Division, who also offered their helpful insight into this research topic and their attentive 6.

(7) help; as well as to the Taiwanese business community in Tijuana, for their goodwill and helpfulness during my field research. I am correspondingly indebted to Dr. Fang-Yi Chiou, in the Institute of Political Science at Academia Sinica (IPSAS), for his instrumental guidance and the opportunity he gave me to join his research team, and for the precious level of discipline and knowledge I was able to attain during those years. I am also grateful for having found great friends and classmates during this process. Among my dear colleagues at IDAS, I would like to especially thank the advice offered by Juan Uriburu, Moises de Souza, André Dejuste and Fernando Schmidt, as well as the support received from my classmates Agata Fijalkowska, Joni Karpijoki, Kaja Kaluzynska, Dharndhanate Hansuksakul, Jasnea Sarma, Pavel Kladivo, Taro Kurokawa, Janet Tan and. 政治大 of understanding the local society and its fascinating dynamics, among them, I am 立 particularly thankful to Ilin Wu, Nina Liu, Kitty Ewertt, Daniel Jian, and Milan Chen. Olga Daksueva. The friends I made in Taipei have also been a great motivation and a source. ‧ 國. 學. In my home country, there are also many people who were instrumental for the completion of this journey. I feel blessed for continuing having the support of my professors. ‧. at El Colegio de México, foremost among them being Prof. Romer Cornejo, Prof. Lien-tan Pan, Dr. Marisela Connelly, Dr. Francisco J. Haro, Dr. Flora Botton, Dr. Angela. y. Nat. sit. Schottenhammer, Dr. Liljana Arsovska, Dr. Yong Chen and Dr. José Luis León. My gratitude. al. er. io. goes as well to my beloved friends, Miriam L. Sánchez and Demian Soto, for our shared. n. interests and their unconditional support and constant signs of reassurance; and to my long-. Ch. i n U. time buddies at Guadalajara, for their words of encouragement.. engchi. v. Finally, this journey was also possible through the faithful support offered by my dearly loved family, and especially by my parents, Gloria and Antonio, who made enormous sacrifices and have been a continuous source of inspiration throughout my life. I also thank the support of my sisters, Alejandra and Felicia, as well as the cheer and joy brought by my nephews and niece, Juan Pablo, Mariano and Mía. I am grateful as well for the support I received from my aunts and uncles, above all from the help I got from Rosa Fernández in Mexico City, Virginia Fernández and José J. González in Tijuana, and Rebeca Fonseca and Isabel Fernández in Guadalajara. To all of them, and to the people who directly or indirectly became a part of this process, but I was unable to address personally in these pages: 謝謝大家! Thank you! ¡Muchas gracias! 7.

(8) Abstract Chinese investments in Latin America have been a popular research topic in recent years, with China becoming the largest investor and trading partner for important countries in the region. However, the case of Mexico is different from its neighboring nations in South America. During the past two decades, and despite the lack of diplomatic relations, accumulated investment from Taiwan in Mexico surpassed that coming from Mainland China. Similarly, Taiwan is among the ten largest trading partners of Mexico, exporting to the latter more than 16 times the amount it imports from there. Therefore, this research aims to explore the patterns of Taiwanese investments in Mexico, and its impact on bilateral trade, as a way to explain its huge imbalance. Theoretically, the study analyzes the evolution of state institutions in both countries, highlighting its difference in approach when responding to the challenges of industrialization first, and then globalization. By following an independent approach, the state in Taiwan was able to advance developmental policies, and eventually consolidate domestic industries with national firms creating its own technology and knowledge-based assets. The state in Mexico, on the other hand, in spite of the implementation of developmental institutions, pursued an integrationist approach, strengthening domestic industries, though making them dependent on foreign capital and the acquisition of technology coming from abroad. NAFTA became the highest point of Mexico’s integrationist approach, hence transforming the country into an attractive export platform to the largest consumer market in the world. Looking to remain competitive internationally, Taiwanese firms started a process of expanding operations beyond their borders, taking Mainland China and Southeast Asia as its preferred destinations, reinforcing the creative process of East Asian regional supply chains. Mexico became a complementary part for many of those firms’ strategies, leading them to invest in the country, ensuring a rapid access to the US market, but pushing them to import large amounts of technology, components, and parts from Taiwan and Mainland China. An empirical analysis, combining the use of statistical data and interviews, will allow us to better understand the motivations behind Taiwanese investments in Mexico, as well as its impact on Mexico’s foreign trade, and will be useful when thinking about solutions to correct trade imbalances, while expanding bilateral trade for the years to come.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v. Keywords: Taiwan; Mexico; trade relations; trade imbalances; investment; developmental state. 8.

(9) Contents Acknowledgements. 6. Abstract & Keywords. 8. List of Tables. 12. List of Figures. 13. Chapter 1. Introduction. 14. 1.1. Background of the Study. 16. 政治大. 1.2. Problem Statement and Significance of the Study. 20. 1.3. Literature Review. 24. 立. 1.4. Main Hypotheses. ‧ 國. 學. 1.5. Variables and Methodology. 32. Chapter 2. Theoretical Considerations: Institutionalism and the State. ‧. 2.1. Institutionalism and the Centrality of the State. y. Nat. 2.2. Industrialization and Developmental State. io. Independent and Integrationist Approaches. n. al. 2.4. The study of FDI and its impact on international trade. Ch. engchi U. er. sit. 2.3. Industrialization and Globalization Challenges:. v ni. 33. 43 45 52. 65 68. 2.4.1. The eclectic paradigm and the motivations behind FDI. 69. 2.4.2. Institutional determinants of FDI. 71. 2.4.3. The linkages between FDI and trade imbalances. 73. 2.5. Concluding Remarks. 76. Chapter 3. Taiwan’s Independent Approach: Industrialization and the Challenges of Globalization. 78. 3.1. Incorporation of Formosa into the World Economy: From Dutch monoculture to Chinese outpost. 79. 3.2. The initial steps towards industrialization in Taiwan: the 19th century. 83. 3.3. Taiwan early industrialization during the years of Japanese rule. 86. 9.

(10) 3.4. Taiwan under Nationalist Rule: Rapid Industrialization led by a Strong Developmental State. 90. 3.4.1. Strengthening the Nationalist rule after the Japanese Era. 90. 3.4.2. The Phase of ISI-Industrialization in Taiwan. 93. 3.4.3. The move to an export-led growth and the experiments of heavy industrialization. 98. 3.5. Deepening the Independent Approach: The promotion of technology-intensive industries. 105. 3.5.1. Taiwan’s independent approach in the 21st century. 113. 3.6. Concluding Remarks. 政治大 Chapter 4. Mexico’s Integrationist Approach: Industrialization and the 立 Challenges of Globalization. 學. 4.1. Incorporation of Mexico into the World Economy: From riches to rags. 123. 4.2. The initial steps towards industrialization in Mexico: the 19th century. 128. 4.3. Mexico’s rapid economic growth during the Porfiriato. 130. y. 122. ‧. ‧ 國. 118. 135. 4.4. Mexico under a Hegemonic Party Rule: The creation of Estado. Nat. sit. Desarrollista and the first phases of import-substituting industrialization. al. er. io. 4.4.1. The Post-Revolutionary Era: The first phase of IS industrialization. n. 4.4.2. Stabilizing Development: the second phase of IS industrialization. n U i e h n g c1970-1982 intervention with dependence on foreign capital,. Ch. iv. 135 142. 4.4.3. The third phase of IS industrialization: Deepening State. 148. 4.5. Globalization and the Deepening of the Integrationist Approach. 155. 4.6. Concluding Remarks. 165. Chapter 5. Looking for a Platform in North America: Taiwan’s Investment and Trade Relations with Mexico. 169. 5.1. Taiwan Relationship Enterprises and cross-strait economic interactions. 170. 5.2. Mexico’s Integrationist Response: The NAFTA Factor. 176. 5.2.1. Major Motivations behind NAFTA. 176. 5.2.2. A New Era for Bilateral Relations. 180 10.

(11) 5.2.3. The NAFTA Challenges. 183. 5.3. Taiwanese investments in Mexico. 188. 5.3.1. The impact of Taiwanese investments in Mexico on the bilateral trade. 195. 5.4. A point of comparison: Chinese Investment in Mexico. 200. 5.5. Cross-strait developments and impact on investments and trade with Mexico. 206. 5.6. Concluding Remarks. 211. Chapter 6. Between Export Platform and Emerging Market: Specific Cases of Taiwanese Investment in Mexico. 214. 6.1. Textile and Apparel Industry: The case of Pou Chen. 215. 政治大 6.1.2. Following customers’ demand: The Pou Chen Group in Mexico 立 6.2. Electronics and Technology-Intensive industries: Three cases 6.1.1. The Evolution of Textile and Garment Industry in Taiwan. ‧ 國. 學. 6.2.1. The evolution of electronics industries in Taiwan. 221 226 226 231. ‧. 235. 6.2.4. A particular interest in Mexico: The Case of Merry Yard Group. 239 245. Nat. 6.2.3. Integrating into the North American supply chains: Eson-Multiwin. y. 6.2.2. Behind the Japanese trace: The case of TPV. 215. sit. 6.3. Educational Services: The case of Wen Cheng. al. n Chapter 7. Conclusions 7.1. Empirical findings. 249. er. io. 6.4. Concluding remarks. Ch. engchi. i n U. v. 253 258. 7.2. Theoretical contributions. 261. 7.3. Future research and final remarks. 264. References. 268. Bibliography in English. 268. Bibliography in Spanish. 293. Bibliography in Chinese. 300. Appendix I – Maps and Comparative Data of Mexico and Taiwan. 304. 11.

(12) List of Tables Table 1.1. Mexico’s Foreign Trade - Selected Countries, 2015. 15. Table 1.2. Exports of Manufactures as Percentage of Total Exports in Large Latin American Economies, 1990-2014. 19. Table 3.1. Macroeconomic indicators of Taiwan during 1st ISI Phase, 1952-1965. 97. Table 3.2. Macroeconomic indicators of Taiwan during its First Export-Oriented Growth Phase, 1965-1980. 100. Table 3.3. Macroeconomic indicators of Taiwan during its First Technology-Intensive Goods Exports Phase, 1980-2000. 112. 政治大. Table 3.4. Macroeconomic indicators of Taiwan during its Independent Approach to Globalization, 2001-2016. 117. Table 4.1. Macroeconomic indicators of Mexico during 1st ISI Phase, 1940-1953. 140. 立. ‧ 國. 學. Table 4.2. Macroeconomic indicators of Mexico during its second. ISI Phase, also known as the Stabilizing Development Phase, 1952-1970. 144. Table 4.3. Macroeconomic indicators of Mexico during its third ISI Phase,. ‧. 151. Table 4.4. Mexico’s External Debt. 153. y. Nat. with a heavy reliance of Public Debt and State Intervention, 1971-1982. Table 5.1. Accumulated IED in Mexico, 1999-2016. 189. er. n. al. sit. 160. io. Table 4.5. Macroeconomic ind. of Mexico, Integrationist Approach, 1983-2016. v ni. Table 5.2. Composition of Accumulated FDI from Taiwan in Mexico, 1999-2016. Ch. engchi U. 191. Table 5.3. Accumulated FDI in Manufacturing from Taiwan in Mexico, 1999-2016 192 Table 5.4. Distribution of Accumulated FDI from Taiwan in Mexico, 1999-2016. 194. Table 5.5. Composition of Mexico’s imports from Taiwan, 2015. 198. Table 5.6. Composition of Mexican exports to Taiwan, 2015. 199. Table 5.7. Evolution in the composition of Mexican exports to Taiwan, 1991-2015 (as % of total exports). 200. Table 5.8. Composition of Accumulated IED from M. China in Mexico, 1999-2016 201 Table 5.9. Total IED in Manufacturing from M. China in Mexico, 1999-2016. 202. Table 5.10. Destination of Chinese Accumulated IED in Mexico, 1999-2016. 203. Table 5.11. Accumulated IED from China in Mexico’s Transportation, 1999-2016. 205. 12.

(13) Table A.1. Comparative Indicators Between Mexico, Taiwan and Other Emerging and Developed Economies, 2016. 306. List of Figures Figure 1.1. Differences between the Independent and Integrationist Approaches. 31. Figure 1.2. Using Mexico as an Export Platform: The impact of 41. Figure 3.1. GDP Evolution of East Asian Developmental States, 1960-1980. 102. Figure 3.2. GDP Evolution of East Asian Developmental States, 1980-2000. 109. Figure 3.3. Taiwan’s Exports and Imports as % of its GDP, 1952-2015. 治 Figure 3.4. GDP of East Asian States 政 following Independent Approach, 1980-2016 大 Figure 4.1. GDP Evolution of立 Latin American Desarrollista States, 1960-1980. 114. Figure 4.2. Mexico’s External Debt Stocks (% of GNI). 154. ‧ 國. 學. Mexico’s integrationist approach on bilateral trade with Taiwan. Figure 4.3. Mexico’s Exports and Imports as % of GDP, 1960-2016. 115 146. 163. Figure 4.4. GDP Evolution of Latin American Major Economies. ‧. during the period of Integrationist Approach, 1980-2016. y. Nat. Figure 5.1. Structure of Taiwanese Relationship Enterprises. 165 172. Figure 5.3. Evolution of Mexico-US Total Bilateral Trade, 1990-2015. 183. al. v ni. n. Figure 5.4. Mexico’s trade with the United States, 1990-2015. Ch. engchi U. er. sit. 181. io. Figure 5.2. Basic Composition of Mexican Exports to the US (selected years). 185. Figure 5.5. FDI in Mexico from Mainland China and Taiwan, 1990-2016. 190. Figure 5.6. Main sectors in Taiwanese Total FDI in Mexico. 191. Figure 5.7. Composition of Accumulated FDI from Taiwan in the Computers and Communication Subsector in Mexico (1999-2016). 193. Figure 5.8. Mexico’s Trade with Taiwan, 1993-2015 (Million USD). 196. Figure 5.9. Evolution of Composition of Mexican Imports from Taiwan, 1993-2015 197 Figure 5.10. Mexico’s Trade with China, 1993-2013. 207. Figure A.1. Mexico and Taiwan Location in the Pacific Rim. 304. Figure A.2. Map of Mexico. 304. Figure A.3. Map of Taiwan. 305. 13.

(14) Chapter 1. Introduction During the past two decades and despite the lack of diplomatic relations or a trade agreement between both sides, Mexico received more than US$710 million in foreign direct investments from Taiwan, as compared to the US$484 million coming from Mainland China. Similarly, Mexico’s bilateral trade with Taiwan has gone from less than US$800 million in 1993, to more than US$7 billion in 2015, according to Mexican official figures, being mostly favorable to the Taiwanese side. In fact, for the year 2015, Mexican trade with Taiwan resulted in a US$6.3 billion deficit, making it one of the sharpest trade deficits Mexico has. 政治大. in its foreign trade relations.1 When framing it in the country’s historical trade with the AsiaPacific region, we could see that despite Mexico has presented a large trade deficit with most. 立. of the countries in the region during the past 25 years, the one country which imports less. ‧ 國. 學. from Mexico, as compared to the total amount it exports, is precisely Taiwan. This increase in bilateral trade, as well as its deficit for the Mexican part, is derived from the process of. economy.. ‧. globalization and successful integration of East Asia, including Taiwan, into the world. sit. y. Nat. At the end of 2001, both mainland China and Taiwan were admitted as members of the World Trade Organization (WTO), raising concerns among Mexican officials and scholars,. io. er. who started to depict trade deficit with East Asia as an example of the threat this region. al. n. iv n C measures against the import of Chinese h efinal n gmanufactured c h i U goods, and the promotion of. represented to Mexican domestic industries, and tried to respond by rising protectionist. exports from all types of goods, from minerals and tequila, to cellphones and auto-parts. During these years, Mexico negotiated a free trade agreement (FTA) with Japan and approached other Asia-Pacific economies, including Taiwan, in an attempt to balance its bilateral trade. All these measures have proved ineffective, since the trade balance has kept on the rise for more than two decades. The case of Taiwan is illustrative, since it demonstrates the difficulties Mexico has gone through to effectively diversify its markets by increasing its exports to the island (Table 1.1). By analyzing bilateral commerce from a classical model of. 1. For a more detailed presentation of the evolution of bilateral trade, refer to the Sub-Secretariat of Foreign Trade, within the Secretariat (Ministry) of Economy, online data, 2016, http://187.191.71.239/sic_php/pages/estadisticas/mexico/F7ppx_e.html. 14.

(15) trading finished goods, the Mexican side has been unable to balance its trade with Taiwan. The purpose of this study is to find an alternative view for this problem, and start looking north of the Rio Grande as a possible determining factor in Mexico’s economic relations with Taiwan and the Asia-Pacific. Table 1.1. Mexico’s Foreign Trade - Selected Countries, 2015 (millions of USD). 523,688.9 72,220.1 20,153.1 25,618.4 1,318.5 1,729.0 15,810.2 6,760.1 797,105.9. 立. Exports (x) 318,365.6 5,964.1 2,608.5 3,978.3 1,028.8 529.1 2,028.3 392.1 397,128.7. Imports (m) 205,323.3 66,256.0 17,544.6 21,640.1 290.3 1,199.9 13,781.9 6,368.0 399,977.2. Balance. 政治大. 學. United States Mainland China Japan NICs -Hong Kong -Singapore -South Korea -Taiwan WORLD. Total Volume. ‧ 國. Country. 113,042.3 -60,291.9 -14,936.1 -17,661.8 738.5 -670.8 -11,753.6 -5,975.9 -2,848.5. m as % of x 64.5% 1,110.9% 672.6% 543.9% 28.2% 228.1% 679.5% 1,624.1% 100.7%. Source: Data obtained from Mexico’s Ministry of Economy, 2016.. ‧. By stating that Mexican integrationist strategy and the evolution of its developmental. y. Nat. state after neoliberal reforms has had a significant impact on its transformation into an export. sit. platform to the United States, attracting numerous investments from Taiwan, which also. er. io. resulted in a rise in imports of equipment, technology-intensive components, and other parts. al. n. iv n C trade deficit with the latter, and with the East Asian region h e n g c h i U in general. To reach this goal, I use a qualitative methodology, focusing on the manipulation and analysis of secondary data, from the island, this study will offer an alternative view to the large increase in the Mexican. particularly statistics data provided by governmental and intergovernmental agencies; and on the elaboration of interviews with officials and businessmen in both countries, in charge of the implementation of economic policies, and the motivations behind Taiwanese investments made in Mexico during the past twenty years. In practice, the outcome of this research can result in the suggestion of new ways to balance Mexican trade with Taiwan, by focusing not only in the export promotion to the latter, but also in the creation of more domestic and North American regional supply chains, that can move the country from an assembler to a high technology producer and net exporter. In other words, a reassessment of the integrationist approach, and the adoption of some policies 15.

(16) more in tune with the independent strategy followed by those newly-industrialized countries in East Asia, including Taiwan. Theoretically, this study can contribute to offer a more integral view of how the evolution of the developmental states in the Asia-Pacific region, and its responses to globalization challenges, had a deep impact on their bilateral investment and trade relations.. 1.1. Background of the Study In recent years, the study of Mexico’s economic relations with the Asia-Pacific region has. 政治大 as the country’s relations to other 立 major players in the region, particularly Japan. However, been mostly dominated by the topic concerning the Mexican reaction to China’s rise, as well. very few has been written about the Mexico’s interactions with the so-called East Asian. ‧ 國. 學. Newly-Industrialized Countries or Asian Tigers (NICs, namely Hong Kong, Singapore, South Korea, and Taiwan), and most of the attention has gone to the case of South Korea,. ‧. mainly due to the latter’s advance in the export of cultural and entertainment material, as well. y. Nat. as the successful development and merchandising of technology devices under famous. sit. Korean brands. However, very little attention has been paid to the development of economic. al. er. io. ties between Mexico and Taiwan. At the same time, most of recent studies developed in the. v. n. Republic of China (ROC or Taiwan) on Latin America has focused mainly in Brazil and its. Ch. i n U. rise as a regional power, as well as its economic potential for Taiwanese exports, derived. engchi. from a continuous expansion of the country’s middle class. Taiwan’s allies in Central America are also an important subject of study, as well as the different integration mechanisms taking place in the region, and the threat posed to Taiwanese interests by an increasing influence from the government of the People’s Republic of China (PRC or mainland China) there.2 Among this type of studies, we can find: Wang, Yu San, “The Republic of China’s Relations with Latin America,” in Yu San Wang (Ed.). Foreign Policy of the Republic of China on Taiwan: An Unorthodox Approach (New York: Praeger, 1990): 155-178; David Tawei Lee, Elaine Ya-Ling Chen, Wen-Ting Tsai, et al. (Eds.), Hands Across the Pacific: Creating a Win-Win Situation in Taiwan-Latin America Relations. (Taipei: Sinorama, 1997); Cristopher M. Dent, The Foreign Economic Policies of Singapore, South Korea and Taiwan. (Cheltenham, UK: Edward Elgar Publishing Ltd, 2002); Marcos Ancelovici & Sara Jane McCaffrey, “From NAFTA to China? Production Shifts and Their Implications for Taiwanese Firms,” in Suzanne Berger & Richard K. Lester (Eds.). Global Taiwan: Building Competitive Strengths in a New International Economy. 2. 16.

(17) At the same time, the case of China-Mexico relations can be used as an example to identify the pattern of the latter’s economic interactions with the rest of the Asia-Pacific countries, including Taiwan. The development of China-Mexico relations has also become a reference for the study of broader China-Latin America relations. When analyzing these phenomena, several scholars tend to compare Mexico’s case with the experiences of other 3. regional players, particularly Brazil, Chile, and Argentina.. Those countries differ. considerably from Mexico, in part because they present a more balanced trade with China and the Asia-Pacific; and for the case of Brazil and Chile, they possess a notable trade surplus with the PRC and other East Asian countries, including Taiwan. Similarly, the countries in South America had received large sums of investments from mainland China, largely but not. 政治大 accumulated investments from Taiwan have far exceeded those coming from mainland China, 立 hence making it very different from the pattern followed among the former´s southern only concentrated in infrastructure and primary sectors. Contrariwise, for the case of Mexico,. ‧ 國. 學. neighbors.. The emphasis placed in the Mexican trade deficit with China, and for that matter. ‧. Taiwan and other East Asian countries, reflects the attention given by the country’s scholars. io. sit. y. Nat. n. al. er. (New York: M.E. Sharpe, 2005): 166-193; Lucía Chen & Alberto Saladino (Eds.), La nueva Nao: De Formosa a América Latina. Intercambios culturales, económicos y políticos entre vecinos distantes. (Taipei: Tamkang University, 2008); Thomas Cieslik, “The Role of Greater China in Latin America,” in Baogang Guo & Sujian Guo (Eds.), Greater China in an Era of Globalization. (Plymouth, UK: Lexington Books, 2010): 161-184; and, Lucía Chen, & Alberto Saladino (Eds.), La nueva Nao: De Formosa a América Latina. Reflexiones en torno al bicentenario de las independencias latinoamericanas. (Taipei: Tamkang University, 2010). Some other books and articles written in Chinese can be found at the end of this proposal, in the third part of the bibliography section. 3 Some of the studies assessing these topics include: Robert Devlin, et al. (Eds.), The Emergence of China. Opportunities and Challenges for Latin America and the Caribbean. (Washington, D.C.: IDB and Harvard University Press, 2006); Jorge Blásquez-Lidoy, et al., Angel or Devil? China’s Trade Impact on Latin American Emerging Markets –Working Paper no. 252. (Paris: OECD Development Center, 2006); Enrique Dussel-Peters (Ed.), Oportunidades en la relación económica y comercial entre China y México. (Mexico City: ECLAC, 2007); Anil Hira, An East Asian Model for Latin American Success: The New Path. (Burlington, VT: Ashgate Publishing, 2007); Luis Herrera, La China del siglo XXI: reto y oportunidad para México. (Mexico City: Mexican Council of Foreign Affairs, 2008); R. Evan Ellis, China in Latin America: The Whats and Wherefores. (Boulder, CO: Lynn Rienner Publishers, 2009); Rhys Jenkins & Enrique Dussel-Peters (Eds.), China and Latin America: Economic Relations in the Twenty-First Century. (Bonn, Germany: German Development Institute, 2009); Daniel Lederman, et al. (Eds.), China’s and India’s Challenge to Latin America: Opportunity or Threat? (Washington, D.C.: The World Bank, 2009); Alex E. Fernández & Barbara Hogenboom (Eds.), Latin America Facing China: South-South Relations beyond the Washington Consensus. (New York: Berghahn Books, 2010); and, Adrian H. Hearn & José Luis Leon-Manriquez, China Engages Latin America: Tracing the Trajectory. (Boulder, CO: Lynne Rienner Publishers, 2011).. Ch. engchi. 17. i n U. v.

(18) and decision-makers when dealing with their relations with the Asia-Pacific region. 4 Constantly pressured by the small and medium enterprises (SMEs), local manufacturers, small retailers and labor unions, Mexican politicians have used this phenomenon to promote some protectionist measures against some imports from Asian countries, particularly China, and to file several controversies against the PRC, and complaints about the latter’s unfair commercial practices before the WTO. Some experts concerned with this fact, and in favor of following a more pragmatic trade policy towards the region, have begun to call for looking different ways to balance trade. So far, the most optimistic proposal, and the one which has gained more attention from policy-makers, is the one related to take advantage of the huge markets offered by the Asia-Pacific countries. 5 However, very few proposals have. 政治大 and have rather followed a road filled with ups and downs. 立 Despite both countries sharing a certain similarity in their export structure, the Mexican materialized, and Mexico’s exports to Taiwan have been unable to show a sustained increase,. ‧ 國. 學. government can do more to encourage cooperation with Taiwanese firms investing in the country, as well as potential investors, in order to promote the creation of domestic. ‧. production and supply chains. Those chains could have the purpose to increase intra-firm and intra-industry trade, as a way to increase bilateral trade, while reducing Mexico’s trade deficit. y. Nat. sit. with Taiwan. Currently, Mexican exports to Taiwan are now focusing on minerals and other. al. er. io. commodities, such as salt, reminding us of the “Latin-Americanization” of Mexico’s. n. commercial relations with Taiwan, mainland China and the Asia-Pacific.6 However, even. 4. Ch. engchi. i n U. v. Among those studies related to the topic of the Mexico-China trade relations, and the Mexican deficit we can count: Francisco J. Haro, “China en el norte de América: la relación con México y Estados Unidos,” in Nueva Sociedad, no. 203, (April 2006): 160-170; and, Enrique Dussel-Peters, op.cit. (2007): 113-406; Luis Herrera, op.cit., 24-31. 5 Examples of those proposals can be found in: Roberto Zapata, “China y Asia-Pacífico: una oportunidad para la política comercial de México,” in Enrique Dussel-Peters & Yolanda Trapaga, (Eds.), Hacia un diálogo entre México y China: Dos y tres décadas de cambios socioeconómicos. (Mexico City: Mexican Senate, 2010): 367384; Zhimin Yang “Cooperación económica y comercial entre China y México: elevando el nivel desde una óptica estratégica,” in Enrique Dussel-Peters (Ed.), 40 años de la relación entre México y China: acuerdos, desencuentros y futuro. (Mexico City: Cechimex-UNAM, 2012): 107-119; and, Enrique Dussel-Peters “The Auto Parts-Automotive Chain in Mexico and China: Co-operation Potential”, in The China Quarterly, 209, (March 2012): 82-110. 6 “Latin-Americanization” is understood as the process when a country becomes highly dependent on the exports of commodities and raw materials. Nowadays, with countries in South America, mainly Argentina, Brazil, and Venezuela, experiencing severe economic recession, it remains clear that these nations’ economic boom from last decade was mainly sustained on the high prices of commodities, driven in part by the rising Chinese demand. Cfr. Beatriz Carrillo et al., “Beyond Asymmetry: Cooperation, Conflict and Globalisation in Mexico-China Relations,” in The Pacific Review, 24, no. 4, (December 2012): 421-438.. 18.

(19) when those sectors have obtained great benefits from exporting to the East Asian markets, it is still unlikely that their performance will suffice to balance trade in the medium term. Therefore, more studies are needed to identify possible solutions, by analyzing the phenomenon from a different perspective.. Table 1.2. Export of Manufactures as Percentage of Total Exports in Large Latin American Economies, 1990-2014 (%) Argentina 29.1 32.5 30.8 33.2 32.1. Year. 1990 2000 2005 2010 2014. 立. Brazil 51.9 58.4 53 37.1 34.8. 政治大. Mexico 43.5 83.5 77.1 76 78.7. ‧ 國. 學. Source: Data obtained from the World Bank’s International Trade Database, 2016. Note: These numbers can be considered an evidence of a partial deindustrialization process occurred in the largest economies in South America, derived mainly from their emphasis in the export of commodities during the past 15 years. In contrast, Mexico maintained high levels of industrialization during the same period.. By bringing into consideration Mexico’s integrationist approach to the challenges. ‧. posed by neoliberalism, as exemplified in the latter’s economic integration to North America,. y. Nat. this study intends to offer a different perspective of the problem, connecting the large trade. sit. deficit with Taiwan, with the larger bilateral trade that Mexico has carried with the United. er. io. States. The large import of manufactures from Taiwan is not an exclusive phenomenon of. al. n. iv n C those parts or semi-finished goods that helped Taiwan-based multinational enterprises h have i U e h n c g and some Mexican sectors to remain competitive in international markets. By following an Mexico. The key point then is to identify that imports of Taiwanese products also include. independent approach, Taiwan could create an important domestic technology sector, with competitive and innovative national champions, which has not been possible to achieve under the integrationist approach currently followed by countries like Mexico.7 As a result, the latter has become an assembler and export platform for those countries who followed an independent path. Contrary to the case of the large economies in South America, Mexico was able to avoid experiencing deindustrialization, and it remains as the most industrialized economy of Latin America (Table 1.2). However, the price to pay has. 7. Alice Amsden, The Rise of the Rest: Challenges to the West from the Late-Industrializing Economies. (New York: Oxford University Press, 2001): 251-283.. 19.

(20) been an ever increasing trade deficit with most of the countries in East Asia, including Taiwan, and an inability to develop indigenous technology industries. Here is where the main practical significance of this study relies. With this in mind, it will be possible to identify complementary approaches to deal with the Mexican trade deficit with Taiwan and other Asia-Pacific nations, as well as dealing with the economic bilateral agenda, and the concerns of Mexican policy makers to find a way to sustainable growth and development.. 1.2. Problem Statement and Significance of the Study. 政治大 assimilation into the North American 立 region has had an impact on its trade relations with. In the next paragraphs, I will note the way Mexico’s integrationist approach, and its economic. Taiwan, causing a deep growing trade deficit with the latter. As noted before, Mexican. ‧ 國. 學. integrationist approach and its use of NAFTA, which I consider the one of the main independent variables in this study, represented the key element in the economic integration. ‧. process of the region. Between the 1940s-1970s, Mexico followed a strategy of Import. y. Nat. Substitution Industrialization (ISI), centered around the concept of “Estado desarrollista” or. sit. developmental state. High rates of economic growths were reported during more than three. al. er. io. decades, until the model was exhausted and the country entered default in 1982, provoking a. n. serious economic debacle for the whole region on which was known as the ‘lost decade.’. Ch. i n U. v. After this traumatic episode, neoliberal reforms began to be implemented in the. engchi. country, and the responses from the once-dominant developmental state led to the deepening of an integrationist approach, being the negotiation of a free trade agreement with the United States, the most important element in this new strategy. Through NAFTA, the three negotiating governments agreed to eliminate the trade barriers among them, in order to constitute a bigger common trade area and boost economic growth, based on the ideas of FDI-led economic efficiency, product specialization and economies of scale. For the Mexican government, NAFTA represented the opportunity to give continuity to its process of economic liberalization, deregulation and insertion into the World markets, making it. 20.

(21) difficult for future administrations to change the neoliberal agenda pursued by previous administrations since 1983.8 By guaranteeing the preservation of these neoliberal trends, the Mexican government sought to gain more access to international markets and foreign investments, in competition with other emerging economies, like the former Socialist countries in Eastern Europe, China, the Asian Tigers, and other major Latin American countries. The immediate years after the signature of NAFTA, from 1995 to 2003, Mexican exports grew at a remarkable pace, and the United States became their major destination, by acquiring more than 70% of them, and getting close to 80% in recent years, according to official data from the Mexican central bank. One of the main goals of Mexico was to take advantage of globalization and the outsourcing. 政治大 infrastructure, developed during the years of the successful developmental state, to assemble 立 intermediate goods and export them as final goods to the American market. This way, Mexico. trends in global production, by offering the country’s cheap labor and the existing. ‧ 國. 學. could consolidated itself as a manufactured goods exporter, and would reverse its dependency on oil exports, which was a main characteristic of the economy since the mid-1970s, and. ‧. caused the severity of the economic crises that struck on the country during that decade and the early 1980s. The implementation of this strategy, aimed in part to promote the country as. y. Nat. sit. an attractive destination for FDI and an assembler of high technology products and add value. er. al. n. countries in the world.. io. to its exports, helps explain the interest of the government in signing several FTAs with other. Ch. i n U. v. Mexico is one of the countries having the most FTAs negotiated with other nations or. engchi. blocs in the globe, totaling 43 national economies, encompassing 67% of the world GDP. The government has stressed that this is also a way to increase and diversify the markets for Mexican exports. Nevertheless, even when the strategy was successful in expanding the structure of Mexican exports and take them away from the oil industry dominance, the majority of exports still have the US as their final destination. The reason for the dependency on the US market needs to be analyzed in further research; however, if the hypotheses proposed in this study are true, the variety of FTAs signed by Mexico might be seen as a way to have preferential access to other countries’ technologies, particularly Japan and the EU, in. 8. Maxwell A. Cameron & Brian W. Tomlin, The Making of NAFTA: How the Deal was done? (Ithaca: Cornell University Press, 2002): 57-80; 208-222.. 21.

(22) order to keep importing HT parts that would be assembled in Mexico and later exported as final goods to the United States.9 The integrationist approach and the country’s economic incorporation into North America was then used by multinational enterprises (MNE) to move some of their assembling processes to Mexico, investing in the country motivated by efficiency-seeking factors, by taking advantage of the cheap labor and geographic position of the country, next to the largest consumer market in the world. However, because of globalization and the outsourcing dynamics that became popular during the past twenty-five years, some of these multinational corporations also took some of their operations to East Asia, who offered part of the same advantages that Mexico, except for the shared border with the US. Therefore, these. 政治大 industrialization process, devised production process where the design, use of high 立 technology and marketing of the products were based in Taiwan (or other countries, such as corporations, including many that were based in Taiwan after the latter’s successful. ‧ 國. 學. Japan and the US), while the labor-intensive parts of the process were developed first in East Asia, and then carried to Mexico for the final assembly stages.. ‧. In the same way, the negotiations of NAFTA made almost impossible for the Mexican government the development of an industrial policy, which is usually identified with. y. Nat. sit. protectionism and mercantilism. Consequently, Mexico has been unable to respond to the. al. er. io. demands of local producers who have been hardly hit by Asian competition, and cannot. n. develop an integral strategy, including the development of efficient financial markets, to. Ch. i n U. v. assist them and make them more competitive and attractive to investments, as other. engchi. governments in East Asia, who followed an independent approach, have successfully done.10 In the end, the combination of these factors made Taiwanese investments in Mexico to grow considerably since the late 1990s, consequently making exports from Taiwan and mainland China to Mexico to grow much faster than its imports, producing a large trade deficit with those places for the Mexican part. It is important to remember that since these countries share a similar structure in their exports, different from other economies in South America, like. Amapola Grijalva, “Los efectos de las incongruencias arancelarias en las relaciones comerciales MéxicoEstados Unidos-China. Una propuesta alternativa a la política de protección,” in Enrique Dussel-Peters & Yolanda Trapaga (eds.). op. cit., 391-415. 10 José Luis León-Manríquez, “China’s Relations with Mexico and Chile: Boom for Whom?” in Adrian H. Hearn & José Luis León-Manríquez (eds.), op. cit., 159-186. 9. 22.

(23) Brazil, Chile and Peru, which mainly export raw materials and have had the opportunity to develop a trade surplus or a more balanced trade relationship with Taiwan and Mainland China, Mexico does not have a good chance to increase its exports to these places in the short or medium term. As mentioned above, Mexican politicians and some influential sectors in society have manifested their concern with the country’s bilateral trade deficit with China and other countries in East Asia, including Taiwan. Responding to these concerns, some Mexican and international economists have tried to show how the increasing imports from this region have threatened local industries, forcing hundreds of factories to shut down and thousands of people to lose their jobs.11 An important part of the business community has tried to seek for. 政治大 to export to East Asia, as a way to compensate trade imbalances. Other studies, like those of 立 Enrique Dussel Peters and Francisco Haro, have tried to identify the industries where Mexico government’s protection, but also proposed the authorities to encourage strategic industries. ‧ 國. 學. is more competitive than these countries, as a way to increase bilateral cooperation, increase investment in the country, and eventually balance bilateral trade.12 Therefore, the proposed. ‧. solutions to trade imbalances are the same as those suggested by the economic theory, by reducing imports through protective measures, and increasing exports through subsidies.. y. Nat. sit. However, these initiatives have not been entirely successful, because they are mainly focused. al. er. io. in the trade of final goods and do not pay attention to trade in parts and intermediate goods.. n. This study will go beyond this by acknowledging an additional cause of the increasing. Ch. i n U. v. Mexico’s trade deficit with Taiwan, and proposing solutions that can be beneficial to the. engchi. overall economy, and not only to the final goods’ industries where Mexico possesses an advantage that can easily be decreased in the future. The strategies that have led Mexico to become an assembler should be broadened to include a more integral set of industrial and financial policies aimed at the development of domestic production and supply chains capable to absorb the foreign technology first, and then to start creating its own. To do this, it is necessary to promote the development of industries that can supply the MNC and local firms manufacturing in the country, to make it less dependent on the imports of parts from other countries, including Taiwan. This way, Mexico will be able to modify the adoption of. 11 12. Robert Devlin, et al., op. cit.: 109-130, 175-190; and, Jorge Blázquez-Lidoy, et al., op. cit.: 17-27. Francisco J. Haro, op. cit.: 160-170; and, Enrique Dussel-Peters, op. cit. (March 2012): 82-110.. 23.

(24) an integrationist approach, getting closer to the independent approach followed by the East Asian NICs, going from assembler to outsourcer, and finally to a net high technology exporter country, with its own internationally competitive brands and a bigger presence in the world markets.. 1.3. Literature Review The post-World War II period has been characterized as a time of economic expansion in most of the globe, with important cases of rapid high-growth, such as the reconstruction of. 政治大 countries (NICs). Being greatly 立influenced by Keynesianism and the success of the New Deal. Western Europe and Japan, and the development of the so-called newly industrializing. in the United States, the post-war international economic organizations sanctioned a more. ‧ 國. 學. interventionist role of the state in the economy, and other important mechanisms which allowed different parts of the world to achieve higher levels of industrialization and. ‧. development. It was John Ruggie who better captured the tendencies of the time, when he. y. Nat. adopted the term ‘embedded liberalism’ in 1982, to describe this combination of promotion. sit. of free trade on one side, with domestic instruments to regulate the economy, in order to. al. er. io. maintain proper degrees of welfare, employment and growth, on the other side.13 It was also. v. n. during the 1980s that the economic performance of Japan was consensually accepted as the. Ch. i n U. most extraordinary economic miracle of the postwar era.14. engchi. Spending many years studying the Japanese case, Chalmers Johnson published one of the first serious analysis on the developmental state, the same year as Ruggie’s article. In MITI and the Japanese Miracle, Johnson made an important effort to explain the main features which can be found in a developmental state, insisting on the relevance of institutions and their capacities to promote economic growth through the elaboration of industrial. John Gerard Ruggie, “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” in International Organization, 36, no. 2 (Spring 1982): 379-415; also found in John Gerard Ruggie, Constructing the World Polity: Essays on International Institutionalization. (New York: Routledge, 1998). 14 Some of the most remembered works on this topic include: Herman Kahn, The Emerging Japanese Superstate: Challenge and Response. (London: Penguin Books, 1973); and, Ezra F. Vogel, Japan as Number One: Lessons for America. (Boston: Harvard University Press, 1981). 13. 24.

(25) policies, and the selection of winning and losing sectors within the economy. Similar institutions to the Japanese Ministry of International Trade and Industry (MITI) could also be identified in other places, making different authors interested in explaining the phenomenon of developmental states in other countries, following Johnson’s example.15 The mid-1980s and early 1990s saw a series of important works on the concept of developmental state, identifying it as one of the main causes for the successful industrialization of those countries in East Asia, particularly the so-called Four Tigers (Hong Kong, Singapore, South Korea, and Taiwan), as well as other parts of the world with lesser achievements. Works like the volume edited by Frederic Deyo, The Political Economy of the New Asia Industrialism, in 1987, containing relevant observations by promising development. 政治大 Haggard, Chalmers Johnson, and Hagen Koo, among others, emphasized the importance of 立 the concept of developmental state to understand the successful economic trajectories scholars of the time, such as Richard Barrett, Bruce Cummings, Peter Evans, Stephan. ‧ 國. 學. followed by the NICs in East Asia.16 Months later, in 1989, Alice Amsden published her research on the role of state institutions in the industrialization and rapid economic growth. ‧. process in the Republic of Korea (ROK), under the title Asia’s Next Giant: South Korean and Late Industrialization, which became a reference in the study of developmental states.. y. Nat. sit. Amsden’s arguments became popular, for challenging the orthodox approach to free markets. er. io. as the best tools for development, noting that one of the main features of South Korean successful industrial promotion was precisely ‘getting the prices wrong.’ This meant that the. n. al. Ch. i n U. v. state used mechanisms to distort the markets, in order to encourage large investments in those. engchi. sectors primarily considered as strategic for future economic prosperity.17 This view was also displayed, together with other elements stressing the use of comprehensive industrial policies, by Robert Wade in his book, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. One of the key features, according to Wade, which made the countries in the region more successful than other developing nations, was that of the skillful mobilization of resources by the state,. 15. Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. (Stanford: Stanford University Press, 1982). 16 Frederic C. Deyo (ed.), The Political Economy of the New Asian Industrialism. (Ithaca: Cornell University Press, 1987). 17 Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization. (New York: Oxford University Press, 1989).. 25.

(26) derived from higher saving rates imposed on their populations.18 That same year, Stephan Haggard published Pathways from the Periphery: The Politics of Growth in Newly Industrializing Countries, where he also noted the strength and weaknesses of developmental states, particularly those in East Asia, but also compared them to those in Latin America, specifically Brazil and Mexico. The main difference identified by Haggard, between these two groups of countries, was that the latter followed a strategy of import substitution industrialization (ISI), depending largely in their domestic markets; while the former combined some of the ISI elements, with an export-oriented strategy, due mainly to their smaller populations and limited natural resources.19 That year marked the end of a decade that had separated developmental states in both regions, regarding East Asian countries as. 政治大 Latin American states performed poorly and went from crisis through crisis during the 1980s 立 and early 1990s, suffering the consequences of mismanagement and overexposure to foreign the ultimate winners in a competition to achieve higher levels of industrialization, while the. ‧ 國. 學. capital.. This distinction was at the center of the debate, which made the works cited above. ‧. powerful responses to the academic trend being followed in many universities and institutions in the West. After the breakup of the Bretton Woods System, and the related. y. Nat. sit. crises of the 1970s in the developed world, the classic approach was regaining force, and the. al. er. io. ideas of prewar and wartime scholars, like Friedrich Hayek, were rescued by Milton. n. Friedman and other economists, who made the state and its excessive intervention in the. Ch. i n U. v. markets, as the sole responsible for the chaotic state of the economy during those years. 20 A. engchi. plea for more open markets, lesser regulations, and the rapid and large-scale privatization of the economy were the main components of a prescription suitable for all cases, according to this trend, later known as economic neoliberalism. Having strong defenders and proponents. 18. Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. (Princeton: Princeton University Press, 1990). Wade published a new edition of his book in 2003, updating some of his ideas, and explaining some of the causes of the 1997 Asian Financial Crisis. However, the basic arguments remained unchanged, suggesting that neoliberal paths were not the answer, but part of the problem in finding a sustainable way for industrialization and economic development. 19 Stephan Haggard, Pathways from the Periphery: The Politics of Growth in Newly Industrializing Countries. (Ithaca: Cornell University Press, 1990). 20 Friedrich A. Hayek, The Road to Serfdom. (Chicago: The University of Chicago Press, 1944); and, Milton Friedman, Capitalism and Freedom. (Chicago: The University of Chicago Press, 1962). Some of the chapters of these books were reproduced in: Naazneen H. Barma and Steven K. Vogel (eds.), The Political Economy Reader: Markets as Institutions. (New York: Routledge, 2008): 87-116.. 26.

(27) in the American and British administrations of the 1980s, neoliberal views were replacing those of an embedded liberalism, promoting an economic liberalization across the world, and a fairer competition for international capital and investments. Therefore, the international financial institutions started the advancement of a set of policies, later known as Washington Consensus, emphasizing the importance of macroeconomic stability, mainly through monetary policy, as the basic framework for a sustained and healthy economic growth.21 The literature on the concept of developmental state of the late 1980s and early 1990s was thought as a response to orthodox economists, from political scientists in the Political Economy study field, stressing the importance of institutions in the success of late industrializing countries, and the weaknesses of markets for that purpose. Therefore, ideas as. 政治大 alternative view to neoliberalism, inviting to look at the case of East Asian countries, to 立 understand the difficulties of proposing a universalistic prescription for development. those advanced by Amsden, Haggard, and Johnson, among others, were relevant to give an. ‧ 國. 學. However, and despite the huge success and resilience of those states, the rest of the developing world, particularly Latin American, Eastern Europe and Africa, were in high need. ‧. of foreign capital and investments, hence taking the decision to embrace the Washington Consensus, partly or mostly liberalizing their economies, and putting aside their desires to. y. Nat. sit. adopt certain features of the East Asian developmental states.. al. er. io. As an effort to discredit the interventionist state, some scholars started to respond to. n. the developmental state literature, arguing that the success of East Asian countries owed more. Ch. i n U. v. to their responsible management of macroeconomics, which also led to the formation and. engchi. accumulation of human and physical capital, rather to an indiscriminate intervention in the economy. This vision was best portrayed in a famous report, The East Asian Miracle: Economic Growth and Public Policy, elaborated by the World Bank, and published in 1993. One of the purposes of that study, was recommending other developing countries not to formulate comprehensive industrial policies and other mechanisms which could distort the functioning of free markets, which eventually created more difficulties than solutions.22 In. 21. For a complete analysis on the effects and motivations behind the Washington Consensus, please refer to John Williamson and Pedro P. Kuczynski (eds.), After the Washington Consensus: Restarting Growth and Reform in Latin America. (Washington, DC: Institute for International Economics, 2003). 22 World Bank, The East Asian Miracle: Economic Growth and Public Policy. A World Bank Policy Research Report. (New York: Oxford University Press, 1993).. 27.

(28) the same tune, one year later, Paul Krugman published an article in Foreign Affairs, trying to diminish the furor over the East Asian developmental states, by claiming that their growth was based on the mobilization of resources, but not on the increase of the total-factor productivity, which is the one allowing the developed societies to sustain growth even after decades of having achieved a higher industrialized stage. In his argument, Kruger predicted a slower growth for the East Asian countries in the years ahead, also showing himself critic of some of the policies followed by developmental states in the NICs.23 The 1997 Asian Financial Crisis (AFC) put a lot of pressure on the developmental states in the region, reinforcing the view of the necessity of having more liberalized economies, and the failure of state intervention to prevent these kind of attacks on national. 政治大 1990s. Neoliberal reforms were promoted in these countries of East and Southeast Asia, 立 weakening the popularity once enjoyed by the developmental state in this part of the world.. currencies, which was started to being common place in developing countries during the. ‧ 國. 學. The constant attacks on the developmental state, and the increasing trend of globalization and liberalization of economies around the world, led to a partial or full dismantlement of its. ‧. institutions on most of the countries that had adopted this strategy in the past. After a decade of neoliberal-inspired changes, new works on the developmental state went on the defensive,. y. Nat. sit. insisting that industrial policies were the key to success for some of the NICs, and using a. al. er. io. comparative framework to counteract the assumption of a universal remedy for late. n. industrializing countries to catch up with the West, as the Washington Consensus attempted to claim for its recipes.. Ch. engchi. i n U. v. Some of the most important works include that of Peter Evans, Embedded Autonomy: States and Industrial Transformation, in particular its chapter on States, where the author elaborates a fine comparison based on the relative embedded autonomy of states and their bureaucracies, from other social and foreign interests, identifying the developmental states of East Asia as those more successful in the combination of embeddedness and autonomy, leading to a more rapid industrial transformation, as compared to predatory and intermediate states, being Zaire, and Brazil and India, respectively, illustrative cases. 24. Paul Krugman, “The Myth of Asia’s Miracle,” in Foreign Affairs, 73, no. 6, (November/December 1994): 62-78. 24 Peter Evans, Embedded Autonomy: States and Industrial Transformation. (Princeton: Princeton University Press, 1995). 23. 28.

(29) Those new works emphasized the comparative element, to show that the success of East Asian developmental states went beyond their fine macroeconomic performance, as claimed by the neoliberal theory.25 Emphasizing the role of institutions, but also of cultural factors, geography, and historical processes, experts on developmental states offered a response to neoliberalism, and tried to influence on the changes that were taking place on those countries. Other relevant books comprise the volume of Meredith Woo-Cumings, The Developmental State, where she reunited some of the most renown scholars on this field, who identified the most common characteristics in developmental policies followed by different states across the world, particularly the first part, with chapters by Bruce Cumings, Chalmer Johnson, T.J. Pempel, and Ha-Joon Chang, approaching the concept from a historical and. 政治大 experiences of more states in other regions, highlighting their successes and failures, such as 立 the cases of France in Western Europe, Brazil and Mexico in Latin America, and India in institutional perspective; while the second part consists of chapters illustrating the. ‧ 國. 學. South Asia.26. Following this comparative trend, Alice Amsden published The Rise of the Rest:. ‧. Challenges to the West from the Late-Industrializing Economies, in 2001. Amsden’s is a detailed account of the historical processes followed by a group of late-industrializing. y. Nat. sit. countries, identified by the author as “the rest”, as opposed to the Western developed. al. er. io. economies and Japan. The analysis associated the degree of success on late industrialization. n. to the existence of certain features, mainly the well-functioning institutions capable of. Ch. i n U. v. promoting the development of knowledge-based assets rather than commodity or primary. engchi. product-based assets, meaning more technological capabilities, as well as the so-called threepronged investments.27 In her work, Amsden highlighted the successes of those countries. 25. Comparative studies were not new in this field. After the collapse of Latin American economies in the 1980s, and the interruption of rapid economic growth in the region, particularly in those countries previously considered as miracle economies, Brazil and Mexico, some analytical comparisons between this region and East Asia began to be arise. A good example is the book written by Ching-yuan Lin, who performs a detailed analysis on the possible causes of the Latin American economic difficulties, the successful management of the East Asian economies, and their different reactions to external shocks, such as the 1970s oil crises. Lin, Chingyuan, Latin America vs East Asia: A Comparative Development Perspective. (New York: M. E. Sharpe Inc., 1989). 26 Meredith Woo-Cumings (ed.), The Developmental State. (Ithaca: Cornell University Press, 1999). 27 According to Amsden, the three-pronged investments consist in investment on 1) large-scale production units and capital goods; 2) modern management practices and railroad infrastructure; and, 3) distribution networks. Combined, these three-pronged investments could help explain the success of late-comers in the. 29.

(30) whose paths or models were more institutionally integrated with the developmental state, and offers an important distinction in response to the neoliberal challenges, between those countries of the rest following an independent strategy (China, India, Korea, and Taiwan), and those following an integrationist strategy (Argentina, Brazil, Chile, Mexico, and Turkey). The main difference between these two groups of states, is that the former prioritized the creation and development of domestic knowledge-based assets, while the latter opted for the acquisition of technology coming from abroad, and embraced more liberal policies, as a way to attract more foreign investment and business know-how practices from more developed economies (Figure 1.1).28 The first decade of the new century experienced a change on the way to approach the. 政治大 conceived, was no longer useful to explain the current economic situation of countries in East 立 Asia and Latin America. Therefore, many scholars decided to study the impact of different. concept of developmental state. The neoliberal triumph meant that this idea, as commonly. ‧ 國. 學. sociopolitical and economic developments on the notion of developmental state. The arrival of electoral democracy in these two regions of the world, particularly in South Korea and. ‧. Taiwan, meant a difference of practice on the institutions related to the developmental states, as noted in articles by Lowell Dittmer, Yun Tae Kim, Joseph Wong, and Yu-shan Wu.29 At. y. Nat. sit. the same time, by the end of the decade, some debates about the fate of the developmental. al. er. io. state unfolded, noting the weakened position it held during the globalization era, as compared. n. to the postwar decades. Examples of this debate are the analysis of Hugo Radice, Richard. Ch. i n U. v. Stubbs, and particularly a volume on the applicability of the developmental state institutions. engchi. during the 21st century in South Africa, edited by Omano Edigheji, containing important contributions from Peter Evans and Ha-Joon Chang.30. industrialization process, contrasting with the early arrivals of the countries in the North Atlantic. Amsden, op. cit., 2001: 70-97. 28 Ibid: 284-294. A more detailed explanation of the differences between the independent approach and the integrationist approach will be elaborated in the following chapters. 29 The referred articles are: Lowell Dittmer, “The Asian Financial Crisis and the Asian Developmental State,” in Asian Survey, 47, no. 6 (November/December 2007): 829-833; Yun Tae Kim, “Neoliberalism and the Decline of the Developmental State,” in Journal of Contemporary Asia, 29, no. 4 (1999): 441-461; Joseph Wong, “ReMaking the Developmental State in Taiwan: The Challenges of Biotechnology,” in International Political Science Review, 26, no. 2 (2005): 169-191; and, Yu-shan Wu, “Taiwan’s Developmental State: After the Economic and Political Turmoil,” in Asian Survey, 47, no. 6 (November/December 2007): 977-1001. 30 The referred articles are: Hugo Radice, “The Developmental State under Global Neoliberalism,” in Third World Quarterly, 29, no. 6, (2008): 1157-1177; and, Richard Stubbs, “What Ever Happened to the Developmental State? The Unfolding Debate,” in The Pacific Review, 22, no. 1, (March 2009): 1-22. The. 30.

(31) Figure 1.1. Differences between the Independent and Integrationist Approaches.  Limits its participation in the local industries, selecting only those where FDI is not perceived as a threat.  Preference for joint ventures with a strong emphasis in technology transfer.  Offers them macroeconomic stability, political certainty, clear regulations, and skilled and semi-skilled labor force.. n. Examples. Ch. engchi. y. ‧. io. al. 學.  A strong emphasis in the development of local sources of technology and innovation.  The state plays a decisive role in the first stages of local research and development, through local content requirements, heavy funding in projects, education, and promotion of joint ventures.  The state facilitates the links between universities and the private sector.  The first efforts include reversal engineering, moderately encouraged by the state.  Once national champions are created, the state gradually decrease its prominent role, but continues some policies in order to enhance competitiveness. South Korea, Taiwan, India, China (after 1978). Nat. Use of technology and knowledge-based assets. 政治大. ‧ 國. 立. Integrationist Approach  The state continues relying heavily in foreign and domestic borrowing for its projects.  The state encourages the existence of a mix banking system, with public- and private-owned banks.  Total or partial foreign ownership of banks is not regarded as entirely negative, considering the better and modernizing practices they could bring with them.  Liberalization of capital flows and exchange rates.  Welcomes FDI in most of the industries, thinking of it as a natural corrector for the flaws in previously protected domestic industries.  Allows partial or total foreign ownership of companies, with many benefits regarding taxes and land.  Does not emphasize technology transfer, but imitation of better business practices and know-how from successful MNCs.  A concrete preference for acquiring foreign technology at different stages of industrialization, as a way to upgrade the competitiveness of local industries.  The state considers its limitations to promote local sources of innovation, and develop policies to integrate foreign technology into local production of goods and services.  Public investments in R&D remain rather small, thinking of the private sector as a more effective actor.  The state relies on market instruments to boost innovation, multinational corporations will automatically transfer technology to local industries, hence there is no need for highly interventionist policies.. sit. Attitudes towards FDI. Independent Approach  Preference for banks to finance industrialization, rather than relying on stock exchange markets Emphasis in a strict control and banking regulations, and an important role of state-owned finance institutions.  The state limits or bans foreign participation in the domestic banking system.  Noticeable use of capital controls and moderate intervention in exchange rates.. er. Use of financial assets. i n U. v. Chile, Brazil, Mexico, Turkey. Source: Adaptation from Alice H. Amsden, The Rise of the Rest, op. cit., 268-284.. referred book is Omano Edigheji (ed.), Constructing a Democratic Developmental State in South Africa: Potentials and Challenges. (Cape Town: HSRC Press, 2010).. 31.

(32) As the above review indicates, there is an abundance of literature on the concept of developmental state, especially those works emphasizing its origins and development prior to the arrival of globalization and the triumph of neoliberalism. However, there is not much analysis performed on the evolution of the developmental state in the first years of this century, in particular there are not many studies furthering the distinction made by Amsden, between “independent” and “integrationist” states. It is precisely this differentiation, that will help us explain the current situation of Mexican trade deficit with the Asia Pacific countries, and for the case of this research, with Taiwan.. 1.4. Main Hypotheses. 立. 政治大. The next hypotheses represent the different relations that are expected to be observed when. ‧ 國. 學. studying the phenomenon in question. From the first to the third ones, these hypotheses can be seen as the different stages that finally led to the Mexico’s large trade deficit with Taiwan,. ‧. taking its integrationist approach and its economic integration with the United States as one. y. Nat. of the starting point, and one of the most influential independent variables. For those reasons,. sit. the dependent variable in each hypothesis can be seen as the independent variable in the. al. er. io. following ones, showing how these variables are all connected in order to shape the main. n. relationship exposed in this study.. Ch. engchi. i n U. v. H1.1: The evolution of the developmental state in Taiwan and its deepening of an independent approach, influenced the creation of industries producing technology-intensive goods, which later had an impact on the development of regional production and supply chains in Asia.. H1.2: The evolution of the developmental state in Mexico, and its adoption of an integrationist approach through the integration of the country into the North American region increased its attractiveness to efficiency-seeking FDI, and the country’s role as an assembler of technology products, and as an export-platform to the US market.. 32.

(33) H2: The reforms in Mexico made possible the attraction of FDI from Taiwanese MNEs, and an eventual increase in imports of parts, including those coming from mainland China and Taiwan.. H3: In Mexico, the increase in imports of parts and components from Taiwan, grew faster than the Mexican exports to Taiwan, provoking a large trade deficit with the latter.. In simple graphic terms, the main relationship composed by the minor relations stated in this research’s hypotheses can be showed as follows:. 政治大 economic integration into North America → ↑ Mexico’s role as assembler and export platform → ↑ 立 investments in manufacture and imports of parts from Taiwan → ↑ trade deficit with Taiwan ↑ independent approach of Taiwan, combined with the Mexico’s integrationist approach and. ‧ 國. 學. This set of hypotheses can also be presented in a negative form, by stating that in case of a. ‧. lack of a Taiwanese independent approach, and in the absence of, or a slower pace in the economic integration process between Mexico and the US, the Mexico’s trade deficit with. Nat. sit. y. Taiwan would not be as large and pronounced as it is today, mainly because Mexico would. io. er. not have had the chance to become an attractive place for FDI and an important assembler and exporter, and would not have the necessity to import a great amount of parts from the. n. al. i n U. v. island. In this sense, the next section will deal with these key relationships, their implications,. Ch. engchi. and how they will be operationalized in this study.. 1.5. Variables and Methodology This study will proceed with a set of qualitative methods, in order to prove the relations stated in the hypotheses, through the operationalization of the variables. The first part, which has an inductive nature, consists in the formulation of a literature framework and the construction of theory.31 As mentioned previously, there exist some descriptive and explanatory studies 31. Earl Babbie, op. cit.: 80-82.. 33.