A Case Study of free trade economics in Mexico

Maquiladoras

Foreign national companies, called maquiladoras, set up in Mexico, often in free trade zones because they offer financial and other advantages.

Advantages of Maquiladoras

• 30,000 jobs have been created
• Technology and training are introduced and workers gain new skills
• Large well known companies attract other companies to the zone creating employment
• Quotas in the free trade zone help create other jobs at an earlier stage of production
• Foreign companies can have positive multiplier effects which have benefit other industries

Disadvantages of Maquiladoras

• In some parts of the free trade zone, strikes and other industrial action is banned
• Profits from the companies are exported back to the  parent company in the wealthy country
• Health and safety regulations are minimal in the free trade zone
• There is no minimum wage or length of working day
• The companies do not contribute to the local community because they do not pay any taxes
• Money used to attract Maquiladoras could have been spent on improving local services and amenities
• Wages in the free trade zone are ten percent of the US wages, if wages in Mexico, in the free trade zone, were increased, companies would move other parts of the world