A Longitudinal Analysis of the Comparative Advantage of Three Key Industries in Mexico, Vietnam, and Japan Under Frameworks for Trans-Pacific Partnership

Abstract

We conducted an analysis for the historical strengths and trends of three key economic sectors – agricultural, automotive, and pharmaceutical - in terms of domestic production and international trade for Mexico, Japan, and Vietnam following the conclusion of the Pacific Alliance in 2011, which enabled Mexico to trade freely with other large countries in Latin America and further free trade initiatives such as the Trans-Pacific Partnership (2015) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018 that included countries in Asia. We used Revealed Comparative Advantage as the empirical framework. The findings indicate that the conclusion of these trade agreements caused certain sectors to gain and certain sectors to lose relative comparative advantage. Vietnam lost comparative advantage in its agricultural sector relative to Mexico’s, which means Mexico could develop its agricultural sector further to support trade with Vietnam. Vietnam’s pharmaceutical industry remained little changed relative to Mexico’s, which means Vietnam should continue focusing resources on the pharmaceutical industry relative to the bilateral trade volume between the two countries.