MEXICO CITY -- Mexico this week made good on a trade deal with China – inked 10 years ago when China joined the World Trade Organization – by slashing tariffs on more than 200 Chinese goods.
Mexico's native shoe, textile, toy and other industries will now face new, tough competition from Chinese imports that are likely to undercut Mexican products' pricing. That could lead to widespread layoffs and create tension between the two trade partners.
Mexican tariffs on Chinese products previously ranged from 50 percent to 250 percent; now the range has been dropped to between 20 percent and 35 percent. Textiles, shoes and toys make up four-fifths of the products affected by the falling tariffs, according to Karen Hooper, Latin America analyst with Stratfor, a publisher of geopolitical analysis. Those industries have voiced concern about competing with Chinese imports, many of which are heavily subsidized by China’s financial structure.
Mexico Economy Secretary Bruno Ferrari told the Mexican press on Monday that the government is working with national industries "to ensure that trade between China and Mexico is handled in equitable conditions and strictly adheres to international norms."
Ferrari spoke from Guanajuato state, where 63 percent of the 266,000 jobs in the shoe industry are situated, according to the shoe industry’s national chamber, CANAICAL.
Asian shoe imports currently comprise 19 percent of the shoe market in Mexico, according to CANAICAL, with the majority originating in China. That share is likely to swell now that tariffs have been sharply reduced.
"So far," Hooper said, "it looks like the Mexican government has been saying 'Tough cookie—you had 10 years advance notice on this. If you don’t try to compete with Chinese goods, then you will lose your market share.'"
"This is all part of Mexico’s slow-rolling liberalization process," she added. "And I think, in the end, it will help those industries modernize."
Alma Montes shopped on Monday for a pair of dress shoes for her son, who needed something spiffy for his first Communion. A saleswoman at La Ribera shoe store in Mexico City’s downtown delivered Montes two pairs of short black boots. Both had tags inside that read “Made in Mexico.”
Montes said she is more interested in quality and less interested in where the product is made – although she didn't have a favorable opinion of Chinese-made goods. But she also said she didn't want to spend more than 400 pesos, or about $29.
"The Chinese stuff just falls apart," she said, fingering the real leather soles of both pairs of boots. By contrast, the Mexican shoes "are more expensive, but they last," she said.
Photo: Lauren Villagran
This post was originally published on Smartplanet.com