US—Mexico employment effects of repealing the US offshore assembly provision

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Abstract
The [OAPs] are contributing to the actual displacement – and impending displacement in the next few years – of scores of thousands of unskilled and semi-skilled factory production workers who are in the economy' mainstream. Nathaniel Goldfinger, AFL-CIO, 1970 We believe that the only benefits derived from the existence of [the OAP] are reached by transnational enterprises through increases in profits. This, however, cannot offset the harm done to the thousands of American's whose livelihoods have been sacrificed in the pursuit of those profits. Mark Anderson, AFL-CIO, 1987 What my well-intentioned but misinformed colleagues fail to realise is that without provisions like [the OAP], products [assembled in Mexico] would be 100 per cent made in Asia. The loss, therefore, would equal not only the jobs used in the assembly process in Mexico, but those used to manufacture the components produced here in the United States. Hon. Jim Kolbe, 1987 The employment effects of the Offshore Assembly Provision (OAP) are highly controversial. Organized labour strongly opposes the provision because they believe it shifts assembly jobs offshore. In constrast, US business contends that in order to compete with imports, domestic components must be assembled abroad. Thus, the OAP preserves jobs in components industries. Mexico favours the provision, believing that it is an important cause of the growth in assembly employment in its northers border region. In this paper, we contribute to the debate over the OAP by supplying estimates of its employment effects in the United States and Mexico for disaggregate industries. We find the claims of both proponents and opponents of the OAP to be greatly exaggerated.