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Did NAFTA really cause Mexico's high maquiladora growth?
Abstract
Although Mexico's maquiladora or in-bond plant system is an important and well-recognized component of Mexico-U.S. trade, the connection between the acceleration in maquiladora growth and NAFTA is less clearly understood. A broad cross-section of maquiladora observers - including journalists, political activists, industry analysts, and professors -- argue that Mexico's maquiladoras have been strongly influenced by NAFTA and have grown rapidly as a result. There are reasons to wonder if these conjectures are correct. I test for the contribution of NAFTA to fluctuations in maquiladora employment and find evidence that no such connection exists. Instead, maquiladoras post-NAFTA growth is connected to changes in Mexican wages relative to those in Asia and in the United States, and to fluctuations in U.S. industrial production. Indeed, for ever 1 percent change in U.S. industrial production I find a change in maquiladora employment of between 1.2 and 1.3 percent. This connection is consistent with declining maquiladora employment in 2001, as U. S. industrial production has fallen, but is not consistent with the NAFTA-caused-maquiladora growth story typically found in newspapers and magazines. ; Economic Research Working Paper 0106
... Source: Buitelaar et al. (2000), Gruben (2001), Sargent and Matthews (2001), U.S. GAO (2003), Moreno-Brid et al. (2005), and Jetro (various issues). ...
... In addition, the phasing out of maquiladora benefits as part of NAFTA was another cause of the decrease in maquiladora production and employment. Source : Buitelaar et al. (2000), Gruben (2001), Sargent and Matthews (2001), U.S. GAO (2003) and Jetro (various issues). ...
This paper studies export processing zones (EPZs) which have become increasingly popular as a policy tool for development and export-oriented growth, and can be found in 130 countries around the world. The report consists of four parts. Part I provides a broad overview on the current use of EPZs, including the evolution of EPZ policy, their objectives and how these are achieved, and the incentives commonly offered. It presents case studies from China, India and Russia illustrating new trends and policies. Part II then provides a review of the economic costs and benefits of EPZs with particular focus on their trade and employment implications. Part III presents an analysis of how common EPZ policies relate to trade rules. It reviews the relationship between EPZs and the WTO Agreements such as the WTO Agreement on Subsidies and Countervailing Measures (ASCM), followed by a discussion of how EPZs are commonly treated in RTAs. Part IV concludes. EPZs are a sub-optimal policy from an economic point of view since it benefits the few and distorts resource allocation, but may be useful as a stepping stone to trade liberalisation on a national basis. Governments should consider all available policy options, and conduct a thorough cost/benefit analysis before implementation.
... De la Madrid began to shift Mexican economic policy from import substitution industrialization (ISI) to export-oriented manufacturing (EOM). Employment doubled yet again during the Salinas presidency (1988)(1989)(1990)(1991)(1992)(1993)(1994) as the neoliberal consensus was consolidated, and finally doubled once again during the presidency of Ernesto Zedillo (1994Zedillo ( -2000 when the industry topped 1 million workers (Gruben, 2001). ...
I use Gramsci's notion of hegemony to analyze how Mexican governments have reproduced the neoliberal state over the past twenty-five years. Hegemony is a spatially-contingent process of consensus and coercion that explains how dominant economic and political policies take shape. In the case of Mexico, I examine the rise of new political elites (technocrats), their attempts at reshaping the corporatist consensus through social pacts, and their use of a regional economic model as national archetype for economic development. More specifically, this analysis employs labor politics to illustrate how the government uses consensus and coercion to maintain the state as the privileged space for shaping the hegemonic geographies of economic development in Mexico.
... 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 (Figure 3). After the inception of NAFTA, the growth of maquiladora industry accelerated, with employment in maquiladora firms surging by 86 percent during the first five years of the agreement, compared with 77 percent growth in the previous five years (Gruben, 2001 andHanson, 2002). ...
The analysis presented in this chapter suggests that the saving rate is only about 1 percentage point below its long-run trend. This unexpectedly modest differential reflects several factors. First, the effect on the saving rate of the decline in equity wealth has been partially offset by the effect of increases in other forms of wealth, including real estate and relatively liquid wealth such as demand deposits. Second, the U.S. saving rate has exhibited a secular, downward trend over the past decade—due, in part, to financial innovation.
... At the outset of the report, the authors acknowledge that "Although there is considerable ignated "high and increasing intra-industry trade" (from 1988-2000) countries -the Czech and Slovak Republics, Hungary, Poland, Germany, Mexico, the U.S., and Portugal -were key players in recent major expansions of regional trade agreements. 3 Of course, correlation does not imply causality -not least because trade policy surely influences the decisions of potential international investors -but as argued by Gruben (2001) in the case of NAFTA, it seems likely that causality runs both ways: ...
This paper demonstrates that international ownership can mitigate the incentives that lead large countries to set inefficiently high tariffs, and may thereby substitute for negotiated tariff liberalization in reaching globally efficient patterns of trade. The policy prediction is unclear, however, because offshore ownership simultaneously introduces the potential for expropriative government behavior by local investment-host countries, which can extract rents from foreign investors by expanding local market access beyond efficient levels. Regardless of the pattern of international ownership across countries and industries, the basic principle of reciprocity continues to serve as an important guide to efficiency, though its formal definition must be modified to account for the pattern of international equity holdings.
... The average growth rate of real value added produced by the maquiladora sector was around 10 percent in the period 1990–2002, over three times the average growth of real GDP during the same period (Hanson, 2002). Although there was a significant increase in employment during the first five years of NAFTA, recent research suggests that this increase reflected cyclical factors rather than the tariff preference afforded by NAFTA (Gruben, 2001). Indeed, the maquiladora sector has been going through a recessionary period since the early 2001 (Gruben, 2004), which is explored further in Section VIII. ...
This paper provides a comprehensive assessment of the impact of NAFTA on growth and business cycles in Mexico. The effect of the agreement in spurring a dramatic increase in trade and financial flows between Mexico and its NAFTA partners, and its impact on Mexican economic growth and business cycle dynamics, are documented with reference both to stylized facts and recent empirical research. The paper concludes by drawing lessons from Mexico's NAFTA experience for policymakers in developing countries. The foremost of these is that in an increasingly globalized trading system, bilateral and regional free trade arrangements should be used to accelerate, rather than postpone, needed structural reform.
... r in some sectors such as footwear and textiles but less clear in vehicles and television sets. Chen and Martinez-Vazquez(2001) say that NAFTA has impacted deeply in the Mexican economy and its institutions, including the industrial distribution of taxes. They propose an adaptation of taxes more adequate for improving exports of goods and services. Gruben(2001) declares that there are low relation between the increase of industrial maquila and NAFTA in Mexico. The econometric approach followed in that article suggests that fluctuations in the trade between the USA and Mexico are explained mainly by other factors although NAFTA has a part in the explanation. Ianchovichina, Nicita and Soloaga(20 ...
We present a comparison of economic development in Mexico with some OECD countries (France, Spain and the USA) and Latin American countries (Brazil and Argentina) and we analyse the evolution of employment in Mexico, having into account the positive impact that industrial development has in non-agrarian employment and the effects of the integration into NAFTA on trade and industrial development. We present an econometric model to explain non agrarian employment depending on direct and indirect effects of industrial development, and relate these findings with other studies on the effects of integration. Although the impact of integration was in many aspects positive, it is clear that it is not enough to foster industrial investment at the level necessary to achieve high rates of non agrarian employment and development in many Mexican regions. On the other hand, the problem of the negative evolution of agrarian employment of Mexico during the last years of the 20th century was more due to the consequences of the evolution of international relative prices of Agriculture than to the direct effects of the integration into NAFTA, and it was common to other countries. The main conclusions point to recommend industrial investment, to focus on regional and rural development, to increase the number of non-agrarian jobs, not only in urban areas but also in rural ones, in order to avoid compulsory emigration, and to eradicate poverty. These complementary policies would amplify the positive impact of integration and they should include a reinforcement of the recent effort to increase public expenditure on education per inhabitant in order to foster the positive effects of education on development.
New cultural geography emphasizes the symbolic and discursive construction of scale, but this rarely translates into concrete policy analysis. The objective of this paper is to analyze the discursive construction of scale in policy. I argue there are two main uses of scale in policy discourse: to build consensus to change and to legitimize the continuity of elite governance. In Mexico, the current debate over labor market reform relies on the spatial-discursive dialectic between change (global) and continuity (national) to legitimize reforming the relations between labor and capital. These changes aim to dissolve the revolutionary labor-government pact, while reinforcing the legitimacy of the corporate State as the privileged agent of social and economic change in Mexico.
International ownership alters the role of multilateral trade institutions by redefining pecuniary externalities among countries. Regardless of the underlying cause - whether foreign direct investment, international portfolio diversification, cross-country mergers, or multinational firms -- international ownership can mitigate incentives that lead large countries to set inefficiently high tariffs. At the same time, however, foreign ownership introduces the potential for expropriation by investment-host countries, which can extract rent from foreign owners by manipulating local prices. The basic principle of reciprocity continues to serve as an important guide to efficiency, though its application must account for the pattern of international ownership in addition to traditional measures of market access.
Empirical studies searching for standard environmental quality impacts of economic growth and international trade have overlooked the connection between production sharing manufacture exports and the rise of industrial hazardous waste emissions. This investigation connects the Mexican Northern Border Maquiladora export expansion with rising Maquiladora emissions and Mexico–U.S. transfers of hazardous waste during the 1990s. Two mechanisms, a sector scale and sector product composition effect, are derived from a one-industry model, which isolates the Maquiladora component of manufactures from the rest of the Mexican economy. Scale refers to the change in emissions and bilateral transfers of waste given an increase in the economic activity of a particular Maquiladora sector. Product composition refers to sector differences in output and emissions due to (a) differences in relative skilled/less-skilled wages across Maquiladora sectors and (b) Maquiladora sector differences in the demand for imported intermediate inputs. An empirical test reveals there is weak presence of the scale effect and a rather strong presence of the product composition effect explained by an increasing demand for imported intermediate inputs. A Maquiladora sector-type variable has no imp act on emissions and bilateral transfers of waste. A positive impact on emissions and bilateral transfers of waste, due to an increase in the demand for imported intermediates, is noticeable following the Mexican Peso crisis: 1995–1999.
This paper demonstrates that international ownership can mitigate the terms of trade externalities that lead large countries to set inefficiently high tariffs, and may thereby substitute for negotiated tariff liberalization in eliminating the strategic manipulation of world prices. The policy prediction is unclear, however, since international cross-ownership also introduces an internal cost-shifting externality that can drive investment-host countries to expand local market access beyond efficient levels in an effort to extract rents from foreign investors. An immediate implication is that simply making large countries act small or completely diversify their global investment portfolios to neutralize traditionally understood terms of trade cost-shifting motives cannot ensure efficient trade policy regimes in an environment with international investment. At the same time, a modified version of the principle of reciprocity does continue to serve as an important guide to efficiency by balancing countries' external and internal pecuniary externalities.
p>La idea central del programa de maquilas de exportación para el gobierno mexicano ha sido la de atraer capital con la finalidad de incrementar la inversión productiva, de crear empleo, lograr transferencia de tecnología, elevar la calificación de la mano de obra y equilibrar las balanzas de capitales y mercancías por la inversión extranjera directa y las exportaciones de la maquila. En esta medida, el gobierno mexicano estableció el régimen jurídico de maquila, que implica que la empresa maquiladora se inscriba formalmente como tal en la Secretaría de Economía, y que pueda importar temporalmente los bienes, maquinaria y equipo necesarios para el ensamble, la transformación o reparación de productos de exportación sin cubrir el pago de impuestos de importación, el valor agregado y las cuotas compensatorias; asimismo, el gozar de exención de impuestos de exportación por parte del gobierno mexicano y en parte del norteamericano (Amsden, 1997). Esta idea general ha tenido muchas modificaciones desde su establecimiento en 1964 y como régimen ha sido relativizado en los noventa con la entrada en operación del Tratado de Libre Comercio.</p
Este documento presenta y verifica un modelo explicativo de la relación entre ciclo económico en Estados Unidos y empleo en la industria maquiladora mexicana. Menciona la escasez de trabajos que estudien los mecanismos de generación de empleos en este sector, en tanto que muestra cómo la industria maquiladora ha tenido un ritmo de crecimiento mayor y más estable que la industria manufacturera durante el período de estudio. Presenta una metodología para verificación empírica de las hipótesis, estableciendo los criterios correspondientes. Los ciclos del empleo en la industria maquiladora mexicana se relacionan positivamente con el índice de producción industrial estadounidense. Entre sus conclusiones destaca que el tipo de cambio no resultó ser un factor que hubiera alentado la generación de empleos por parte de las maquiladoras.
Focusing only on Mexico's total employment and its unemployment rate obscures an important response to economic downturns, namely, relative growth in the informal sector.
This paper investigates whether the output of the Mexican maquiladoras is an alternative to production in the Pacific Rim. The analysis involves estimating supply functions for Mexican maquiladora output using relative wage data for Mexico, Singapore and the United States. It also involves estimating the impact of relative wage rates on maquiladora output in five industries as well as on more aggregated levels. Results indicate that production in Mexico and in the Pacific Rim are substitutes, although this relationship is stronger for some industries than for others. Copyright 1993 by Oxford University Press.
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