Maquiladoras and NAFTA: The Economics of U.S.-Mexico Production Sharing and Trade

Debate continues over the benefits of U.S. trade with Mexico, the North American Free Trade Agreement (NAFTA), and particularly maquiladoras, or cross-border production sharing plants. Maquiladoras generate a large portion of U.S.-Mexico trade, yet the economic effects are not widely understood. Many believe there is no benefit to such trade because it leads to the loss of U.S. jobs, production, and wages. Maquiladora products, however, have a high U.S. content that in addition to fostering productivity gains in both countries, may actually minimize the loss of U.S. jobs by allowing the higher paying jobs to stay at home rather than be shipped entirely abroad, for example, to Asia. Still, adjustment to globalized production creates challenges, particularly in addressing the plight of low-skilled workers who become unemployed. Research, however, continues to point to domestic rather than trade policy for the likely solutions, particularly the emphasis on education and training programs.