How did NAFTA affect Mexico’s manufacturing and trade?

The North American Free Trade Agreement (NAFTA) significantly reshaped Mexico’s economy by expanding its industrial base and integrating it more deeply into North American trade markets.1

Impact on Manufacturing

NAFTA facilitated an explosion of foreign investment in Mexico, which helped disperse industrial employment across the country, particularly in the Central and North regions. A key driver of this growth was the maquiladora system—manufacturing plants that import and assemble duty-free components for export. These facilities allowed foreign companies to capitalize on lower labor costs, leading to increased production of motor vehicles, electronics, and consumer goods. While this industrialization created jobs, it also drew criticism regarding working conditions and environmental impacts.12

Impact on Trade

The agreement led to a dramatic surge in trade, with Mexican exports rising from approximately $60 billion in 1994 to nearly $400 billion by 2013. This growth was mirrored by a significant increase in imports, providing Mexican consumers with access to a wider variety of lower-priced, higher-quality goods. Despite these gains, the overall economic growth and per capita income increases were more modest than proponents had initially envisioned.34