The role of Mexico in the North American supply chain

Type de publication:

Conference Paper


Gerpisa colloquium, Puebla (2017)


The role of Mexico in the North American supply chain (Theme 3)
Corey Brincks, Thomas Klier, James Rubenstein

Automobiles are examples of weight-gaining goods, which become more expensive to move after each step in the assembly process. As such, even in the age of a global auto industry, production of vehicles takes place in the trade region in which they are sold. Yet, more than 2/3 of the value of a finished vehicle originates away from the vehicle assembly line. Both in the European Economic Area (EEA) and amongst NAFTA member states, supply chains have responded to free-trade agreements over the last two decades by becoming increasingly integrated across international borders (e.g. Klier and Rubenstein, 2015 and 2017).
Recent elections in Western Europe and North America seem to suggest that such free-trade arrangements may face reversal in the near future. Industry participants, analysts and academics are working to develop a stronger understanding of the impact such a supply-chain disintegration or “unstitching” would have on the auto sector and the economy as a whole, both in North America and in Europe (see for example Head and Mayer, 2016, and CAR, 2016). The most recent relevant analysis focuses nearly exclusively on the assembly of vehicles. This paper intends to inform the discussion about supply chain disintegration by documenting the extent to which the vehicle parts supply chain within North America has become integrated across country borders. More specifically, the authors will examine data to measure the share of overall parts content that originates from a Mexican supplier for a vehicle produced in the U.S., and vice versa. Furthermore, we attempt to break out data by major vehicle subsystem.
Data on supply chain integration are hard to come by. This paper presents several different attempts to measure such integration in North America, both from microeconomic and macroeconomic perspectives. The microeconomic approach utilizes data from the American Automotive Labeling Act(AALA) which records for vehicles for sale in the U.S. market the share of parts content sourced from the U.S., Canada, and other significant countries for each model. The macroeconomic approach utilizes trade data for automobile parts from the United Nations Commodity Trade Statistics Database. Both methods utilize production and sales figures from Ward's Auto in order to properly weight each vehicle model.
We find that U.S. automotive assembly has a significant reliance on Mexican parts and components, and that Mexican automotive assembly also has a significant reliance on American parts and components. This kind of information is a key ingredient to inform the analysis of impacts from potential policy changes such as the imposition of a border tax by the U.S. Government, or revisions to key parameters of the NAFTA treaty.

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