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This article examines the factors that affect the value added of the maquiladoras as a group as well as the apparel, electrical equipment, food, furniture, and motor vehicle equipment industries. It also explores the impact of the North American Free Trade Agreement (NAFTA) on the maquiladoras. The economic variables of relative wage rates, relative prices between Mexico and the United States, and U.S. real gross domestic product generally appear to have their expected effects. However, with the possible exceptions of the clothing and electrical equipment industries, this study suggests that NAFTA had either a negative impact or no effect on the maquiladoras. (JEL F14,054)
ABBREVIATIONS
APA: Advanced Pricing Agreement
GDP: Gross Domestic Product
ISIC: International Standard Industrial Classification
NAFTA: North American Free Trade Agreement
PE: Permanent Establishment
RESET: Ramsey Regression Error Specification Test
(ProQuest-CSA LLC: ... denotes formulae omitted.)
I. INTRODUCTION
In recent years, the effect of the North American Free Trade Agreement (NAFTA), implemented in 1994, on the Mexican maquiladora industries has been a subject of continuing controversy. Accordingly, a primary purpose of this study was to examine the nature of the NAFTA impact, if any, on the maquiladora value added at both the aggregate and the industry level where suitable data are available. While certain provisions of the NAFTA were potentially favorable to the maquiladoras in the early years of the agreement, other aspects of the pact revoked some of the special status given to those firms. The goal of NAFTA with respect to the maquiladoras appeared to be to integrate them more fully into the domestic (Mexican) economy while further opening Mexico to international trade with the United States and Canada.
The Mexican maquiladora or production sharing program was begun in 1965 under the Border Industrialization Program, developed after the United States ended the Bracero program. The maquiladora industry as a whole has grown from nearly 76,000 employees in 1974 to almost 1.3 million in 2000.' In the year 2000, annual output of the maquiladoras in current prices was about 751.6 billion pesos. This total price consisted of approximately 583.7 billion pesos worth of imported (to Mexico) intermediate goods; 63.9 billion pesos of domestic intermediate goods; and 85.2 billion pesos in salaries, wages, and benefits to employees. (The remaining 18.8 billion...