Mexican competitive advantage in NAFTA: a case of social dumping A view from the automotive industry

Abstract

In the midst of the NAFTA renegotiations, the Mexican Automotive Industry (MAI) has drawn much attention. Gaining a progressive share of markets, jobs and portfolio investments within the region and accounting for the entire US trade deficit, the MAI is one of the most critical pieces in the way of a new NAFTA. In addition, the US President, Donald Trump, has criticised it as an example of the shortcomings of the old agreement. These facts call for a better assessment of the MAI's sources of competitive advantage. This paper builds on business cycle theories and socio-economic perspectives of market embedded institutions to provide an additional lens with which to study the MAI and NAFTA. It presents theory and evidence to demonstrate that the MAI position rests on social dumping policies that underpin illegitimate sources of competitive advantage. It then discusses the issues at stake in the current NAFTA renegotiations.