Protectionism, usmca and its Possible Effects on Mexico’s Automotive Industry

Abstract

Mexico’s integration into the North American regional automotive industry is an outcome of nafta. This brought about Mexico´s insertion into regional value chains in the global automotive industry. The country now ranks as the seventh largest producer in the world owing to its attractiveness for foreign direct investment, cheap labour and proximity to the U.S. market. The nafta renegotiation and the emergence of the usmca resulted in a series of modified and stricter rules of origin. Among them, is a clause aimed at Mexico requiring that a percentage of labour content be paid more than $16 an hour. This article sustains that this clause will not really be a constraint for transnational auto companies’ desire to continue their investments and production of cars in Mexico. Rather, what could exclude Mexico from the international automotive production circuits is the upcoming technological change. In view of that, it is crucial that the government take steps to support the automotive innovation developments and the industry´s higher value-added phases.