Trade Theory Predictions and the Growth of Mexico's Manufactured Exports

Abstract

In 1953 W. Leontieff found, contrary to predictions of the Heckscher-Ohlin theory of comparative advantage in international trade, that U.S. exports embodied relatively more labor and less capital than U.S. imports.1 In a general cross-section study of the determinants of trade patterns, G. C. Hufbauer has recently found a similar paradox for Mexican trade. As measured by U.S. coefficients, Mexico's manufactured exports in 1965 were more capital intensive than Mexico's manufactured imports.2 Although the Mexican case appears to be the unique exception, it is a significant exception because Mexico has also been among the most successful of the semiindustrialized countries in expanding exports of manufactures. In view of the stress placed on the expansion of manufactured exports as a solution to trade restraints on development, both by individual countries and in the continuing UNCTAD conferences, it would seem worthwhile to examine the Mexican exception in some detail. That is the purpose of this study. Since the uniqueness of the Mexican case stems from the high capital intensity of Mexico's exports, the study will be limited to export performance rather than the net balance of import and export capital intensity. It will be shown that not only do capital-intensive goods dominate Mexico's manufactured exports now, but also that these exports have grown to that dominant position rather steadily since 1950. A resolution of this paradox of growing and dominant capital-intensive exports from a presumably labor-abundant less-developed country is then sought in four major types of explanations adopted from those that have been offered to resolve the