Environmental Regulations and Corporate Strategy: A NAFTA Perspective

By Alan Rugman; John Kirton et al. | Go to book overview
Canada is today.' This view that NAFTA will lead in the long term to complete trilateral regional integration to a level enjoyed by the United States and Canada today is accepted by Studer ( 1994).
4.
While this process has been delayed somewhat by the peso crisis and lack of new large-scale US automotive investment in Mexico, the additional profitability which integration brings will increase the affordability of high-level environmental performance, while the transfer of technology and training through integrated production systems provides an additional incentive.
5.
The Mexican industry was also substantially integrated with that of the United States. The automotive industry was and is the single most important sector in two-way US-Mexican trade. Indeed, most of overall US-Mexican trade comes from intra-corporate shipments by the big three ( General Motors, Ford, and Chrysler) and US parts producers. In 1995 the United States exported $394 million in vehicles and $6.7 billion in parts to Mexico, while importing $7.8 billion in vehicles and $10.5 billion in parts ( US Department of Commerce 1995; USTR 1997: 48).
6.
On the deep and pervasive consensus behind high environmental performance in Canada, see Kirton ( 1994).
7.
The United States began the NAFTA era with 30,000 auto parts producers, with $100 billion in annual sales, servicing 15 million vehicles. Canadian firms produced $12 billion worth of parts for about 2 million vehicles. In contrast, Mexico had only 680 parts manufacturers selling $6.5 billion worth of parts for 1 million vehicles ( Studer 1994: 45).
8.
They accounted for 48% of the sector's GDP. About 500 were majority Mexican- owned, producing, in family-controlled, labour-intensive firms, low value added and low technology parts largely for the local market and particularly the aftermarket. These firms accounted for 40% of Mexican autoparts production and 60% of employment in the industry ( Studer 1994: 25).
9.
These enjoyed high technology, high value added, and economies of scale. They accounted for 40% of auto industry employment and over half of auto parts exports from Mexico. With Mexico's 1994 removal of all remaining FDI restrictions in the industry, their ranks were clear to expand.
10.
20 received Chrysler's Penstar award, 37 more Nissan's Hyoka award from 1991 to 1992, and 77 Ford's Quality Q-1 certification ( Studer 1994: 55).
11.
This was from US $11.1 to US $22.9, in part due to US tariff reductions on light truck imports from Mexico.
12.
There has been some rationalization. For example, Ford has stopped producing Thunderbirds and Cougars in Mexico and concentrated their production at Lorain, Ohio.
13.
The 1997 generation of studies on NAFTA effects, centred on the President's report of July 1997, point to extensive economic benefits and environmental disappointments, but generally do not address the impact of regulatory changes and convergence. For the main studies, see USTR ( 1997), the Heritage Foundation ( Sweeney 1997), the Center for Strategic and International Studies ( Weintraub 1997), the Federal Reserve Bank of Chicago ( Kouparitsas 1996), the Brookings Institution ( Lustig 1997), the Economist ( 1997). Those critical of the Agreement include the Council on Hemispheric Affairs ( 1997), and the Economic Policy Institute ( 1997). The environmental disappointments relate to the absence of a NAFTA development fund to support needed scientific research and environmental enhancement, the

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