Analysis of Horizontal and Vertical Intra-Industry Trade: The Case of Mexico and China

Abstract

The purpose of this study is to measure and analyze the extent of vertical and horizontal intra-industry trade between Mexico and China in seven sectors over a five-year period, from 2012 to 2016, using disaggregated trade data at the SITC three digit level; and to identify in what sectors IIT is mainly concentrated. Lastly, this paper aims to disentangle trade into: inter-industry trade, horizontal intra-industry trade, low quality vertical ITT (low ITTV) and high quality vertical ITT (high-ITTV). One of the main findings is that there is relatively low bilateral intra-industry trade between Mexico and China. Furthermore, the results showed that it was high-ITTV that prevailed over low-ITTV. In this type of trade, China is mainly exporting low quality goods to Mexico.