Examining the Bilateral Relationship between Mexico and South Korea through the Trade in Value-Added Perspective, 2000-2021

This article examines the trade relationship between Mexico and South Korea through the lens of trade in value-added perspective. Using the global input-output model, we dissect gross exports into their value-added components to analyze the sectors benefiting most from value-added generation in both countries. To do this, we use the multiregional input-output matrices developed by the Asian Development Bank (ADB). The results show a growing bilateral relationship between 2000 and 2021, with South Korea having a stronger position by generating a larger share of value-added linked to the bilateral relationship. Nevertheless, the gap has narrowed over time. Notably, South Korean exports to Mexico have substantially contributed to value-added generation in technology-based manufacturing sectors such as machinery, equipment, electronics, electrical, and optical products. Similarly, Mexico's mining sector increasingly relies on exports to South Korea for value-added generation. The trends observed in this study's findings persist even amidst the reconfiguration of Global Value Chains, indicating that a free trade agreement between Mexico and South Korea has the potential to further enhance value-added generation.

Automated summary

This article examines the trade relationship between Mexico and South Korea by analyzing the value-added perspective. Using the global input-output model, the study investigates the sectors that benefit the most from value-added generation in both countries. The results show a growing bilateral relationship, with South Korea generating a larger share of value-added linked to the bilateral relationship. The findings indicate that a free trade agreement between Mexico and South Korea has the potential to further enhance value-added generation.