The free trade agreement with Mexico was expected to help U.S. autoparts suppliers move southward to take advantage of low labor cost, but this has not yet happened. We can find explanations for this rather perplexing phenomenon through analyzing the outcome of a postal survey conducted just before the North American Free Trade Agreement (NAFTA) went into effect. The responses from the suppliers highlight the apparent hierarchy in the lean produc-tion system and its impact on the location choices of the parts-manufacturing firms. Despite advances in transportation and telecommunication technologies, the need to maintain short distance with respect to customers is still the single most important consideration in their decision-making. Given the reluctance on the part of the vehicle assemblers, a mass migration of suppliers to Mexico seems unlikely, although it is true that they are quite attracted to the low wages offered south of the border.
Small Business Economics – Springer Journals
Published: Jan 1, 2005
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