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Trade In Value Added

It has been widely assumed that American-made parts and components constitute a substantial percentage of the products that are manufactured in Mexico and Canada and imported by the United States.

But that is increasingly not the case, according to a recently-released report.

Analysis of newly released “value-added” data from the Organization of Economic Cooperation and Development (OECD) shows that the share of US-produced content in manufactured imports from Mexico and Canada has eroded significantly since the mid-1990s.

The share of US-produced content incorporated in manufactured goods imported by the United States from Mexico was only 16 percent in 2011, down from 26 percent in 1995, the first year for which the data are available.

Meanwhile, the share of Chinese content in Mexican products imported by the United States increased from 0.3 percent in 1995 to 6 percent in 2011, and the share of content from all non-NAFTA sources increased from 14 percent to 27 percent.

The same holds true with Canada. The share of US parts and components in imports from Canada fell from 21 percent in 1995 to 15 percent in 2011, while the share of Chinese content increased from 0.3 percent to 3 percent, and the share of content from all non-NAFTA sources increased from 12 percent to 21 percent.

“The declining share of American parts and components in imports from Mexico and Canada is all the more reason for us to take a fresh look at NAFTA,” said US Commerce Secretary Wilbur Ross. “The assumption was that American manufacturers of intermediate goods were big beneficiaries from trade with NAFTA, but with their share declining, American companies are not benefiting nearly as much as once believed. Even more alarming is the fact that the most recent data available on value-added in trade is only through the year 2011. The trend of Mexico and Canada using more non-US-made parts and components may mean even more bad news for American producers.”

The post Trade In Value Added appeared first on Global Trade Magazine.

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