The Driving Force Behind the Creation of a NAFTA Regional Economy

Author: David Eaton
Publisher: National Law Center for Inter-American Free Trade (softcover)
Pages: 92
Publication Date: 1997
Price: US $20.00

En Español

The Mexican maquiladora industry is one of the primary engines driving Mexico's recovery from its current economic crisis. While the importance of this industry is unquestionable, changes spurred by NAFTA may adversely affect businesses who are inadequat ely prepared. This study will provide industry leaders, plant managers and attorneys with information necessary to guide their businesses and clients through the upcoming times of change. The study centers around the maquila's future role as a pivotal p layer in the creation of a North American regional economy, including an analysis of NAFTA's impact on the $40 billion annual maquila suppliers' market after the year 2001.

A maquila is an assembly or manufacturing facility located in Mexico in which U.S., Asian or European companies prepare goods for American consumers utilizing Mexico's inexpensive labor force, geographic proximity to the U.S., and temporary importation (T I) programs. Assimilation of the maquilas into modern integrated production schedules establishes links between Mexico and the U.S. which will facilitate the eventual creation of a unified regional economy.

Since the creation of the maquila regime in 1965, the most important benefit offered to foreign manufacturers has been the TI of raw materials, parts and components from foreign sources without the payment of import duties. The TI program was designed so that maquilas would avoid payment of duties on inputs used in the assembly of final products destined for the U.S. consumer market. NAFTA will eventually eliminate most import duties between the U.S. and Mexico for goods originating in North America. T here is a common misunderstanding that the maquila industry will lose its utility when NAFTA eliminates import duties between the U.S. and Mexico.

This study demonstrates that, despite TI program reductions caused by NAFTA, future investments in maquilas will be pursued to take advantage of low labor costs in Mexico, geographic proximity to the U.S. and the benefits of NAFTA. The study addresses is sues of hazardous waste management, cross-border transportation, social infrastructure, electrical power generation and wastewater treatment since these significantly impact communities with large concentrations of maquilas. In summary, this study will in form the reader that despite the fact that TI programs will be severely restricted under NAFTA, important benefits under the maquila program can still be realized if calculated steps are taken to prepare for the future.

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