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Federal Register / Vol. 86, No. 213 / Monday, November 8, 2021 / Notices
The shift away from the vertical integration of automobile and automobile parts production is also essential to understanding the nature of automotive industry employment. The automotive supply chain has become the backbone of the automobile assembly industry, employing more people than the automobile producers.
In 1990, 271,400 automobile manufacturing employees and 653,000
automobile parts employees produced 9.5 million vehicles in the United States. After a decade of record high automobile production, beginning in 2001 automobile manufacturing employment declined each year to a low of 146,400 workers in 2009. For automobile parts manufacturing, employees increased by 29 percent to a high of 839,500 in 2000 before falling to a low of 413,700 workers in 2009. While employment overall rebounded somewhat after 2009, in 2017 workers in both the automobile sector 212,000
employees and automobile parts sector 586,300 employees remain 29 percent below their 2000 levels, despite record demand.38 Many of these jobs moved offshore as a result of import competition in the United States and lower labor costs available abroad.39
C. NAFTA and the Rise of Automobile and Automobile Parts Production in Mexico Instead of the United States The contraction of the U.S.
automotive industry has been ongoing for decades, but the contraction became more dramatic after NAFTA went into effect and caused a significant portion of the U.S. industry to shift production to Mexico. Prior to NAFTA, Mexico had in
place a restrictive decree that limited automotive trade. NAFTA, however, expanded to Mexico the existing integration of the U.S. and Canadian automotive manufacturing supply chain created under the Canada-United States Automotive Products Agreement signed in 1965 and the U.S./Canada Free Trade Agreement signed in 1989.
NAFTAs elimination of customs tariffs allowed automobile producers and automobile parts suppliers to optimize operational structures by relocating assembly operations and supply chain manufacturing to Mexico the most cost competitive location within North America. The results of the shift in supply chain are dramatic. Since NAFTAs entry into force, the value of U.S. imports of automobile parts from Mexico increased by 652 percent, and the value of automobile imports from Mexico increased by over 1,000
percent.40
1. The Rise of Automobile Assembly in Mexico and Offshoring of Automobile Plants Mexicos ability to compete for new North American automotive investments under NAFTA stemmed primarily from the countrys relatively lower labor costs. Automobile assembly compensation had been approximately 80 percent lower in Mexico than in the United States, and labor represented a sizeable share of the production cost for automobiles.41 For example, from 2008
to 2013, the average hourly wage in Mexico was $5.89 $US, nominal for the automobile sector. These wages were slightly more than one-seventh of the comparable wage in the United
States.42 In 2016, the hourly wage for workers in the automobile sector was $4.65 in Mexico compared to $40.17 in the United States.43 In Mexico, dollar equivalent wages decreased because the currency depreciated sharply in comparison to the U.S. dollar.44 This large disparity in wages resulted in significant cost savings to manufacturers. One analysis estimated that assembling an automobile in Mexico resulted in an average cost savings of $1,200 for an automobile sold in the United States and $4,300 for an automobile sold in Europe.45 Lower Mexican wages, coupled with labor productivity that is comparable to workers in the United States, influenced corporate decisions to increase automobile assembly in Mexico.
In fact, between 2011 and 2016, nine of the 11 announced new automobile assembly plants in North America were built in Mexico,46 while the number of facilities in the United States declined.
The large rise in Mexican assembly investment is relevant because 80
percent of Mexican vehicle production is exported to the United States.47 As shown in Table 2, in 1985, there were 65 automobile assembly plants in the United States and 12 plants in Canada, but only nine in Mexico. As of 2017, the number of automobile assembly plants in the United States declined by 30
percent to 46 plants, while the number of Mexican automobile assembly plants doubled to 18. The number of Canadian automobile assembly plants declined only modestly from 12 assembly plants to 11 during the same period.48

Plants in North Americ 1985-2017
Canada
12

17

Mexico
9

65

United States
8

14
14

62

63

13

11
12

11
12

15

11
18

62

66

48

47

46

14

10

38 Department of Labor, Bureau of Labor Statistics, Employees for Motor Vehicles NAICS
3361 and Motor Vehicle Parts 3363 industries, https www.bls.gov/iag/tgs/iagauto.htm.
39 Thomas H. Klier and James M. Rubenstein, Imports of Intermediate Parts in the Auto IndustryA Case Study, November 67, 2009, https upjohn.org/measurement/klier-rubensteinfinal.pdf at 4.
40 Department of Commerce, Census Bureau, International Trade Management Division.
Retrieved from Trade Policy Information System TPIS Database: USHS IMPORTS, Revised Statistics for 19892017.

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41 Bernard Swiecki and Debbie Maranger Menk, The Growing Role of Mexico in the North American Automotive Industry, Center for Automotive Research, July 2016, http www.cargroup.org/wpcontent/uploads/2017/02/The-Growing-Role-ofMexico-in-the-North-American-AutomotiveIndustry-Trends-Drivers-and-Forecasts.pdf.
42 International Labor Comparisons, The Conference Board, https www.conferenceboard.org/ilcprogram.
43 Id. These data are calculated by the Conference Boards International Labor Comparisons ILC
program using the same concepts and methodology as those developed by the Bureau of Labor and
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Statistics. Compensation costs relate to all employees in manufacturing and include 1 direct pay and 2 employer social insurance expenditures and labor-related taxes.
44 Board of Governors of the Federal Reserve System, Foreign Exchange RatesG.5A Annual 45 Swiecki and Menk, The Growing Role of Mexico in the North American Automotive Industry, supra.
46 Id.
47 Id.
48 Wards Intelligence InfoBank.

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Source: Wards Intelligence InfoBank includes foreign-owned production in each country.