ECONOMIC INTEGRATION AND INDUSTRY LOCATION: Mexico-U.S. Integration and the Structure of Wages in Mexico

Trade reform in Mexico has lead to a dramatic increase in Mexico-U.S. trade, which has further expanded following the passage of NAFTA in 1994. Table 5 shows U.S. trade with Mexico from 1980 to 1995. A large fraction of U.S.-Mexico trade in manufactured products is the result of U.S. multinational firms establishing export assembly plants, known as maquiladoras, in Mexico. These plants import most parts and components from the United States and export most output back to the United States. In 1995, exports by maquiladoras accounted for 40.2% of all Mexican exports to the United States. Most maquiladoras assemble one of three types of goods, apparel, electronics, or auto parts. In 1995, these three industries accounted for 72.6% of total maquiladora employment in Mexico and 80.5% of total exports by maquiladoras to the United States. comments

Maquiladoras account for a major portion of recent manufacturing employment growth in Mexico. Table 6 shows employment in all manufacturing plants and employment in maquiladoras for all Mexico and for Mexican states on the U.S. border from 1980 to 1997.

Total Manufacturing Employment Employment in Maquiladoras Nation Border States Nation Border States
1980 2,139.1 448.1 119.6 114.1
1985 2,488.0 585.4 212.0 199.2
1988 2,629.0 727.7 369.5 349.7
1993 3,246.0 969.6 542.1 468.0
1995 3,221.6 681.3 570.0
1997* 3,737.0 939.5 757.0

The share of Mexican manufacturing employment accounted for by maquiladoras rose from 5.6% in 1980 to 25.1% in 1997. These plants are overwhelmingly concentrated in Mexican states on the U.S. border. It appears that the shift in production to northern Mexico has occurred mainly through the exit of domestic firms located in the center of the country and the entry of maquiladoras located in the border region. Thus, in Mexico expanding trade with the United States has coincided with large inflows of foreign investment, a shift in production towards the Mexico-U.S. border region, increased specialization in a narrow range of goods, and, within industries, greater specialization in assembly-type activities.