Thanks to investments from foreign carmakers

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Reference no: EM132224032

Thanks to investments from foreign carmakers, Mexico’s auto industry is booming. The initial stimulus for the dramatic growth of the Mexican auto industry was the establishment of the North American Free Trade Agreement (NAFTA) in 1994. But Mexico’s shift to free trade didn’t stop with NAFTA. Mexico spent much of the 2000s hammering out free trade deals with over 40 other countries, including the 28 states of the European Union, Japan, and Brazil. This unprecedented network of regional trade agreements has given Mexico an important edge when it comes to attracting new investment. As Mexico’s auto industry has grown, auto-part suppliers have also followed manufacturers to Mexico.

a) What was the initial impact of NAFTA on the U.S. and Mexican automobile markets? Who benefited the most from this?

b) How did the impact of NAFTA start to change location decisions by automobile manufacturers over the years? How did this start to impact automobile production in Mexico and the United States?

c) What lessons can United States policy makers draw from the growing success of the Mexican automobile industry that can be applied to future free trade deals?

Reference no: EM132224032

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