Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers

23 Pages Posted: 10 Dec 2008

See all articles by Beata Smarzynska Javorcik

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

Wolfgang Keller

University of Colorado; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

James Tybout

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Abstract

This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal-Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labour-shedding and from innovation, which in turn was fuelled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the US detergent market over the past decade, Mexican sales in the US were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re-tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non-Latin consumers, and in order to comply with zero phosphate laws in many regions of the US.

Suggested Citation

Javorcik, Beata Smarzynska and Keller, Wolfgang and Tybout, James R., Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers. World Economy, Vol. 31, No. 12, pp. 1558-1580, December 2008, Available at SSRN: https://ssrn.com/abstract=1310963 or http://dx.doi.org/10.1111/j.1467-9701.2008.01142.x

Beata Smarzynska Javorcik (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford
United Kingdom

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-8485 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/bjavorcik

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Wolfgang Keller

University of Colorado ( email )

Department of Economics
PO Box 256
Boulder, CO 80309
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

James R. Tybout

Pennsylvania State University - Department of Economics ( email )

517 Kern Graduate Building
University Park, PA 16802-3306
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
4
Abstract Views
1,078
PlumX Metrics