What Trade Agreement Increased The Growth Of Maquiladoras

In 1989, a revision of the program allowed Maquiladoras to sell up to fifty percent of its products in Mexico`s domestic markets. Despite these advantages, maquiladoras remained a relatively untapped resource until the adoption of the North American Free Trade Agreement (NAFTA) in 1994. When NAFTA implementation began, it created the world`s largest free trade area, connecting more than 400 million people to a production of goods and services worth more than $11 trillion. It has also increased Mexico`s visibility as a potential manufacturing partner for companies in the United States and around the world. Over the past four decades, Mexico has made a dramatic transition from a relatively closed economy to one of the most open countries in the world. This process began with Mexico`s accession to GATT in 1986 and continued with the signing of free trade agreements with 32 countries, including the North American Free Trade Agreement (NAFTA) in 1994. In late 2019, the Trump administration gained the support of congressional Democrats for the USMCA after agreeing to incorporate stricter enforcement of labor laws. In the updated pact, the parties agreed on a number of changes: the rules of origin for the automotive industry were strengthened, so that 75% of each vehicle must come from member countries, compared to 62.5%; and new labor regulations have been added that require 40% of each vehicle to come from factories that pay at least $16 an hour. A proposal to expand intellectual property protection for U.S. pharmaceuticals — a long red line for U.S. trade negotiators — has been sacrificed. The USMCA also significantly reduces the controversial investor-state dispute settlement mechanism, eliminating it entirely with Canada and limiting it to certain sectors with Mexico, including oil and gas and telecommunications.

These benefits of trade often escape attention because, although the costs are highly concentrated in certain industries such as auto manufacturing, the benefits of an agreement like NAFTA are widely distributed across society. PROPONENTS of NAFTA estimate that about fourteen million jobs in the United States depend on trade with Canada or Mexico and that the nearly two hundred thousand export-related jobs created each year by the pact pay an average of 15 to 20 percent more than the jobs lost. Nevertheless, NAFTA has been a constant target in the broader free trade debate. President Donald J. Trump says it has undermined jobs and manufacturing in the United States, and in December 2019, his administration signed an updated version of the pact with Canada and Mexico, now known as the United States-Mexico-Canada Agreement (USMCA). .

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