News, Insights and Best Practices for Manufacturing in Mexico

NAFTA transforming Mexico as more U.S.- Asian companies move there

13 Mar 2014

Category: Manufacturing in Mexico

The North American Free Trade Agreement (NAFTA) is of vital importance to the North American economy, both for Mexico and the U.S., according to a recent article in The Epoch Times.

NAFTA has existed since 1994, and it spurred an enormous amount of trade between the U.S. and Mexico, which has benefited Mexican industries significantly. According to Shannon O'Neil, senior fellow for Latin American Studies at the Council on Foreign Relations, NAFTA has overall, but the losses that impact America are not as severe as some critics say.

"Would we still see today if we had not signed: apparel made in rural Massachusetts, carpets in the Carolinas, or drill bits in Cleveland, Ohio? … The answer is 'no,' because all these things today are made in China with whom we do not have a free-trade agreement," she said in a speech at a forum held by Washington, D.C., think tank NDN. "Now if we had not signed NAFTA, do you think we would see cars made in Detroit? Airplanes and jets made in Kansas City? Tractors in Peoria, Ill.?" she said. "The answer is probably 'no.'"

Transformation in Mexico
The Epoch Times reported that NAFTA has dramatically changed life in Mexico. The country's Gross Domestic Product has doubled since the agreement's introduction, going from $510 billion to $1.78 trillion in 20 years. Before NAFTA's introduction, there was very little trade between the U.S. and Mexico, but thanks to NAFTA, Mexico is becoming an export and manufacturing hub. According to O'Neil, it has also become more open commercially, and developed a strong democracy.

Part of the reason for Mexico's transformation is the way it is now connected with the U.S. According to The Epoch Times, the U.S. has a share of 40 percent of the value that comes from Mexico. Mexican production has now become a way to create products that are often supplied as parts which are assembled in other countries like the U.S.

"[NAFTA] has helped the United States to remain competitive globally so that we have regional supply chains that allow us to compete with China [and others]," said O'Neil. "That fundamentally is what NAFTA has done."

Foreign companies also benefit from NAFTA
Foreign countries can also benefit from moving to Mexico. According to Mexico Now, Korean company Daewoo is joining the group of Asian firms. Daewoo will construct buses in a plant in Ciudad Sahagun, Hidalgo. Daewoo is spending $30 million on the construction of the plant, which will span 6 hectares and employ 180 workers, along with 15 people who will be administrators.

Daewoo will be working with the Mexican company American Coach to create Daewoo Bus Mexico.

The plan is to build fully constructed bus units and bodies with 300 units sold in Mexico per year.

An American company, Manitowoc Foodservice, is also expanding to Mexico. It will move the assembly of its ice machines from Manitowoc, Wis., to a new facility in Mexico, according to local ABC affiliate WBAY.

According to the company, the transfer will "more effectively serve customers in Latin America as well as our U.S. customers."


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