Mexico's competitive advantage in nafta: The auto industry, a case of social dumping

Abstract

The negotiations of a new nafta have focused attention on the Mexican auto industry. With increasing participation in the region's markets, jobs, and portfolio investment and, as 90 percent of the U.S. trade deficit vis-a-vis Mexico, this industry is key for formulating a new nafta. President Trump has targeted it for criticism, considering it the best example of a treaty that has been bad for his country. That is why it is appropriate to look now at new explanations for the basis for the Mexican auto industry's competitive advantages. This study is based on theories of business and investment cycles and concepts of market and institutional anchoring to evaluate the conditions for auto industry competitiveness under nafta. It argues that the sector has operated under political conditions of social dumping, basing its position in regional and global markets on illegitimate sources of comparative advantage.