The Automobile Industry and The Mexico-Us Free Trade Agreement
This paper considers the likely effect on the automobile industry of a free trade agreement between the U.S. and Mexico. As there are currently large restrictions on imports into Mexico, one important outcome of a free trade agreement would be the opening of the Mexican market to U.S. producers. This is consistent with the history of the international auto industry and the fact that the U.S.-Canada Auto Pact opened a new, large market to U.S. manufacturers. The current state of the Mexican auto industry is considered in great detail, suggesting that the Mexican industry will continue to prosper, increasing output but also relying heavily on production from U.S. owned plants and on inputs imported from the U.S. and Canada. However, much of the existing domestically oriented industry is likely to be replaced by other North American producers. Finally, an econometric demand analysis implies that economic growth together with declines in prices to world levels could rapidly expand the size of the Mexican auto market. The free trade agreement represents an opportunity for product diversification and rationalization in the auto industry.
|Date of creation:||Aug 1992|
|Date of revision:|
|Publication status:||published as Peter Garber, ed. The US-Mexico Free Trade Agreement. Cambridge, MA: MIT Press, 1993|
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- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Linda Hunter & James R. Markusen & Thomas F. Rutherford, 1991.
"Trade liberalization in a multinational-dominated industry: a theoretical and applied general equilibrium analysis,"
Federal Reserve Bank of Dallas, pages 39-42.
- Linda Hunter & James R. Markusen & Thomas F. Rutherford, 1991. "Trade Liberalization in a Multinational-Dominated Industry: A Theoretical and Applied General-Equilibrium Analysis," NBER Working Papers 3679, National Bureau of Economic Research, Inc.
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