EFFECTS OF NAFTA

Effects of NAFTA on the Auto Industry in Mexico

Effects of NAFTA on the Auto Industry in Mexico

Introduction

Mexico is possibly the most prominent hub that no other manufacturer, as it has more important division in the automotive industry. From a purely quantitative research approach, in the year 2002, including its two major branches-terminal and autoparts-Apor- tobacco, 14.2% of the value added generated by the manufacturing sector. In the field, of foreign trade in the same year, exports of the automotive industry accounted for 20.7% of total sales abroad were given by the sector. Meanwhile, imports of automotive products absorbed 13.8% of foreign purchases of manufactured goods.

To give a clearer idea of the relative magnitude of foreign sales of this industry, it should be mentioned that in 2002 a sum of 29,689.9 million dollars, an amount equal to 3.7 times the economy's trade deficit as a whole, which was 7916.2 million dollars. In the case, of imports of products automotive, which totaled 22, 159.9 million dollars in the year indicated, were equivalent lenses 2.8 times the external deficit of the national economy. Finally, it surprised that the industry's trade surplus, 7530.4 million dollars, was nearly equals the trade deficit across the country. As is evident, the performance of the automotive industry in the external front is capable, by itself, to bring the whole of the economy to balance or imbalance with the outside.

Economy and Trade Division

The signing of the Free Trade Agreement (FTA) involves more commercial and financial interdependence between Mexico, United States Canada. With regard to the automotive industry, international specialization of work means that Canada and the U.S. provide the capital and technology, while Mexico provides human capital (cheap labor) that together with the existence of lax environmental standards have transformed the country into assembler. Additionally, thanks to this scheme of organization, business multinationals locate their plants in the country; however, a significant part of production is oriented to the outside, such as exported cars with low technology (compact units). On the hand, imports based on technology-intensive such as trucks (trucks passengers and cargo) were also a part of the export.

Additionally, it is difficult to acquire these new trucks internally because they are expensive, in addition, low perceptions of the sectors that demand and the price differential between used car Mexico and the United States selling locally depressed forcing traders to cross the northern border of Mexico to buy (Mostly used) into the country illegally. In the Congress there have been three initiatives 1 seeking regulates this problem by granting import permits for the final placement of origin of motor vehicles have been admitted foreign temporarily in the country (Banamex, 2000). Thus, in the course of this regulation the country seeks to enable free movement within the units. It is estimated that the economic flow would approve the initiative. Thus, it is also estimated that the revenue by way of being imposed by final importation, the sale of trucks and such holdings amount to 95 thousand ...