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Source: Alonso de Gortari, “Disentangling Global Value Chains,” NBER Working Paper No. 25868, May 2019.
Commentary: As trade has globalized, it has become increasingly rare for goods to be produced entirely by any single nation. An import to the U.S. is likely to contain value produced in several countries, including in the U.S. itself. This presents a significant challenge to measuring the actual value created by any one nation. But a detailed analysis of Mexican customs data has revealed that U.S. exports to Mexico are disproportionately likely to return to the U.S. rather than stay in Mexico or be sold elsewhere. Accounting for these differences, 30 percent of the value of U.S. imports from Mexican manufacturers comes from U.S. inputs, rather than the 18 percent that has been estimated in traditional calculations. This demonstrates that the U.S. and Mexican economies are more closely integrated than has been understood previously, underscoring the importance of the two countries’ bilateral trade relationship.