Advantages of Owning Facilities Outside the U.S. Prior to NAFTA
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What advantages do cities outside of the US as in Canada have by owning manufacturing facilities in Canada prior to NAFTA?
Considering the passage of NAFTA, what advantages exist for having manufacturing facilities remain in Canada?
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The solution discusses the advantages of owning facilities outside of the United States prior to NAFTA.
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Advantages that cities outside of the U.S. as in Canada have by owning manufacturing facilities in Canada prior to NAFTA:
Manufacturing facilities in Canada benefit from increased exports to NAFTA member countries. Previously Canada and the United States had a free trade agreement which promoted exports but inclusion of Mexico in NAFTA means manufacturing companies have opportunity to increase the value of exports. The cities that had manufacturing facilities were in a better position to exploit market opportunities due to availability of capital and labor.
NAFTA has had a significant effect on labor as the three countries have different labor cost. NAFTA did not have impact actual production facilities thus did not affect aspects such as labour costs within individual country. Mexico and the United States have lower labor costs thus investors are moving these countries due to cheaper labor. Canadian cities that had manufacturing facilities prior to NAFTA enjoy the advantage of sustained employment. The cities' population received wages and rates higher compared to the other countries.
Investopedia (2008) provides that Canadian cities that were located close to Detroit such as Ontario and Windsor benefited due to production of automotive parts and development of assembly of assembly facilities. ...
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