China in the automotive industry in Mexico: perspectives and challenges in the transition from NAFTA to USMCA

Type de publication:

Conference Paper


Gerpisa colloquium, Paris (2019)


Added value, China, investment, NAFTA, USMCA


On November 30th, 2018, the United States-Mexico-Canada Agreement (USMCA) was signed to replace the North American Free Trade Agreement (NAFTA). The signing took place without solving the problem of tariffs on steel and aluminum, combined with the inclusion of chapter 4 that seeks a higher regional added value (RAV) in the autoparts-automotive chain (AAC), the greatest winner of NAFTA. It is argued that these actions seek to raise the competitiveness of the industry in the region against China, since in addition to Chapter 4, Article 32.10 stablishes that partners should report their intention to start free trade agreement negotiations with economies of no market ( China) at least three months in advance.

After examining the core of chapter 4, we statistically identified the conditions and challenges that the Mexico-US-China triangular relationship faces before more rigorous rules of origin in the AAC. Although China's presence in the NAFTA region has been practically irrelevant in terms of investment, this paper reviews the content of the new agreement emphasizing possible major limitations to the presence of the Asian country in the North America region. Next, we review the characteristics of the main Chinese investment corporations in Mexico, which gives us an interesting clue to the magnitude of the corporations that already have a presence in the automotive industry in this market. The hypothesis that one of the main intentions of the USMCA is to stop the advance of China in the competition for the market in the North America region is notoriously visible when considering the production strategies in processes and products developed by the large corporations in the automotive industry in China. Finally, we refer to the possible influence of the "Chinese production model" and the type of union relations that could be deployed based on the so-called corporate unionism still linked to the previous regime in several locations in the country. Three aspects should be considered about the Chinese presence in the productive sphere. First, the transfer of the productive models from the Asian country to Mexico; secondly, the general perspectives of the development of work in Mexico within the sector and thirdly, the influence of the still existing model of corporate unionization based on the control of the labor force from the floor of the factory and the election, negotiation and participation processes of the organization members.

In sum, we argue that the current conditions and characteristics of Chinese corporations and investments in the automotive industry in Mexico carry the enormous potential that the area represents for the Asian country as a global expansion strategy, even in the context of the renegotiation of the trade agreement and before the modifications and new regulations that the projected USMCA seeks to establish to contain the potential advance of this country in the region. The Chinese corporations investment schemes have been deployed in the Mexican territory not only with a view to overcoming the trade slowdown already experienced in the Asian market, but also to take advantage of the new capabilities that these corporations have been developing as part of the national growth strategy in China, driving the assimilation of artificial intelligence and the internet of things in processes and finished products. It is argued as well that in case of ratification of the USMCA, China could be integrated into the new industrial organization of the chain by significantly increasing its investment amounts in Mexico, practically irrelevant but with significant impact to this day.

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Géry Deffontaines

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