Chapter 2: Is Japanese Foreign Direct Investment Fostering Production Networks in Mexico?
Melba Falck Reyes1 INTRODUCTION 1. In 2005, Mexico and Japan signed an Economic Partnership Agreement (EPA) that constituted for both countries their first trans-Pacific bilateral trade agreement. With the EPA both countries looked to increase their global competitiveness that had been lost in the past decades. Mexico’s main objective was to attract more foreign direct investment (FDI) from Japan and to have a better market access in some specific sectors. For Japan, the aim was to recover the privileged position that the Japanese firms had lost in 2001, when a special clause inserted in the North American Free Trade Agreement (NAFTA) eliminated free imports of parts and components outside the NAFTA region. Japanese FDI had a long tradition in Mexico, attracted since the 1960s by the then newly established maquiladora system. As some authors have pointed out, this was maybe the first example of regional production-sharing where parts and components were assembled in Mexico and then sent back, as finished products, to the United States. Nonetheless, it was when NAFTA came into being in 1994 that more Japanese firms were interested in locating their production plants in Mexico. Nowadays, with the development of advanced telecommunications and transport systems, the globalization of corporate activities has become increasingly developed. Technology and FDI have played an important role in the ‘fragmentation’ of production processes. Today, transnational firms are involved in more sophisticated schemes than the maquiladora arrangements on the Mexico–US border, fragmenting their production both at the domestic and cross-border level. Now...
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