Chapter 9 Opening Case Questions:
1. To begin with, Mexico’s car industry was small and wasn’t doing as well as other countries
because their prices were so high. Mexico was being protected from foreign competition by
high tariff barriers which cost them most of their expenses and caused their prices to be high.
Importing and exporting cars and their parts also dug into Mexico’s money. Once NAFTA came
through and removed most of the tariffs and nontariff barriers there was able to be trade
between Mexico, Canada and the United States. Not only was Mexico’s prices lowered, but it
was also cheaper for them to import auto parts from the U.S. Another benefit Mexico gained
was access to duty free markets. Mexico became the fourth largest auto exporter in the world.
2. Mexico shaped out many free trade deals with over 40 other countries, including the 28
states of Japan, Brazil and European Union. Since the trade agreement Mexico has been
attracting new investments, like when BMW ships cars out to other countries they charge a
10% import duty and this had an impact on there decision to build a new factory in central
Mexico instead of the United States. Even Delphi, a large auto parts supplier, has benefited
from the trade. They have 30 factories in Mexico and generates revenues of $3 billion in the
country.
3. Yes, this does signal that NAFTA was a bad deal for the United States. Because of BMW
expanding their plant in central Mexico they will not be expanding at their South Carolina plant
in the U.S. Not only has it effected the country but the citizens too. It has caused a negative
impact on employment growth in the United States car industry.