370 Explaining Business Support for Regional Trade Agreements
The internationalization of the U.S. market meant that efforts by electronics
and automobile firms to limit imports (through voluntary export restraints) had
minimal effects on impeding their international rivals, which merely relocated to
the U.S. market to avoid voluntary export restraints and other trade barriers. Also,
the strategy of reinvesting in new technology and equipment in the U.S. market
proved to be too costly in the short term.
Thus the preferred option was to locate production of component parts in areas
characterized by cheap labor and proximity to the U.S. market. Some electronics
firms moved their operations from Asia to Mexico and the Caribbean Basin to
lower their transportation costs in exporting to the U.S. market. Auto firms
increasingly used Mexico to source component parts for the U.S. market.
Furthermore, the beginning of the 1990s [saw] auto companies expand their Mexican
operations to include production of finished vehicles, including state-of-the-art
autos that were previously produced only in the advanced markets of the United
States and Europe.
Apparel producers have also used foreign locations for low-cost advantage in
producing component parts for the U.S. market. U.S. apparel firms typically sub-
contract with garment producers in the Caribbean Basin and Mexico for the
production of clothing or textiles for export to the U.S. market. As a result, some
of the leading U.S. apparel firms have joined other U.S. industries, such as
electronics, automobiles, and electrical equipment, to push for CBI and NAFTA.
However, as I discuss in detail later, other apparel firms tied to the U.S. market
have mounted successful opposition against tariff reductions proposed by their
international counterparts in lobbying for CBI.
These foreign direct investors and subcontractors form part of a powerful political
coalition lobbying for NAFTA and CBI, often against nationalist firms. The next
section of this paper locates the emergence of this coalition in the context of the
internationalization of the U.S. market, especially the dramatic increases in foreign
direct investment by Japanese companies....
THE INTERNATIONALIZATION OF THE U.S. MARKET:
THE CASES OF AUTOMOBILES AND CONSUMER ELECTRONICS
U.S. auto and electronics firms faced vigorous competition from their Japanese
counterparts in the 1980s, which provided the major impetus for industrial
restructuring. Prior to 1982, Japanese auto firms did not have a single production
plant outside Japan. Instead, Japanese firms, led by Toyota, relied on a “lean
production” strategy that emphasized exports to the developed market economies
as a method for increasing market share. Innovations in Japanese production
provided formidable challenges to U.S. car manufacturers, who had been late in
shifting from “mass production” methods to a more flexible production system....
The production strategy employed by Japanese firms involved a number of
interrelated changes designed to increase output at considerably lower costs. They
included the introduction of sophisticated computer technology to facilitate the
designing and engineering phases of production, the relatively low parts inventory