econintersect .com

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 23 September 2017

Mexico's Growing Role In The Auto Industry Under NAFTA: Who Makes What And What Goes Where

from the Chicago Fed

-- this post authored by Thomas H. Klier and James M. Rubenstein

Mexico has become one of the world’s leading producers and exporters of motor vehicles, although it has no automakers of its own. During the more than two decades under the North American Free Trade Agreement (NAFTA, entered into by the United States, Canada, and Mexico),

Mexico’s light vehicle production more than tripled - from 1.1 million units in 1994 to nearly 3.5 million units in 2016. Moreover, Mexico’s light vehicle exports increased from 579,000 to 2.8 million units during the same period.1 By 2016, motor vehicle assembly and parts plants employed 735,472 workers in Mexico.2 Mexico is the low-wage country among NAFTA partners. Over the period 2007 - 14, on average, wages in motor vehicle assembly represented around one-fifth of those in the United States and wages in the production of motor vehicle parts about one-eighth.3 According to one 2016 news article on trade trends, after a recent growth spurt, the automotive sector now represents 25 percent of Mexico’s manufacturing exports and over 3 percent of the country’s gross domestic product (GDP).

In this article, we explore the impact of NAFTA on Mexico’s motor vehicle industry - specifically, on Mexico’s integration into North America’s automotive industry and the subsequent increase in intra-industry trade in automobiles.5 The auto industry has undergone dramatic changes over the past 20-plus years. First, we provide a brief summary of the history of auto production and related trade policies in Mexico before NAFTA. Then we provide a detailed analysis of Mexico’s light vehicle production and exports from 1990 through 2016. Our analysis shows how Mexico has become an integral part of North America’s motor vehicle industry. In addition to aggregated industry-wide statistics, we are able to draw on data that identify the specific country of sale for vehicles produced in Mexico. These data are available on an annual basis from 2005 through 2014. Finally, we discuss how the observed trends in Mexico’s light vehicle production and trade have affected the spatial distribution of auto production within Mexico and across North America. We show that as in the United States, the motor vehicle industry has agglomerated in Mexico.

Mexico has a long history of motor vehicle production by international automakers. The first entrant was Ford, which began to assemble Model Ts in Mexico City in 1925.6 General Motors (GM) and Chrysler built their first assembly plants in Mexico during the 1930s (Werner, 1993). By 1960, a dozen companies were assembling vehicles in Mexico and supplying most of the domestic market (Klier and Rubenstein, 2013b; and Moreno Brid, 1992, p. 260).

[click on image below to continue reading]

Source &lid=4835 &elqTrackId=3aec8b741d384ac981c7e851426b494a &elq=5973c38addab48b997b71151dce0ce83 &elqaid=12231&elqat=1

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Contributors

Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved