Abstract
Export processing zones (EPZs) and regional trade agreements are two common initiatives utilized by developing country governments in order to increase the wealth creation effects of today's international trade and investment system. In this paper, we argue that these two initiatives are driven by somewhat incompatible economic rationales. Based on the North American experiment in combining a major EPZ (Mexico's maquiladoras) within the terms of a regional free trade agreement (the North American Free Trade Agreement), we test to determine whether the logic of a regional integration initiative or that of the EPZ is dominate. Our results suggest that the competitive dynamics of Mexico's EPZ industry have not been fundamentally altered by NAFTA's regional incentives. We conclude with recommendations for policy makers in other developing countries that might be considering attempting to impose regional development schemes on the large and politically powerfully TNCs that tend to dominate the global EPZ industry.
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