Mexico’s maquiladora (twin plant) industry was founded in 1965 in order to take advantage of changes in the U.S. tariff code. U.S. manufacturers were complaining in the early 1960s that Japanese manufacturers were beginning to dominate markets because of cheap labor and strong government support. Many U.S. manufacturers wanted to take advantage of more economical labor throughout the world, while still maintaining production of a portion of their products in the U.S. However, U.S. tariff code at the time mandated that if a tariff on a foreign-produced good was in place, it applied to 100% of the value of the product, regardless of whether a percentage of the product was made in the U.S. but assembled abroad.
In order to help keep U.S. companies competitive, the U.S. government changed its tariff code to allow the U.S. content in an imported product to be excluded from tariffs. Thus, the Mexican government, wishing to industrialize its border regions and to create badly needed jobs, created its maquiladora industry, which allowed Mexico to assemble products made out of foreign components/materials — predominantly U.S. — using Mexican labor. When these products were exported to the U.S., tariffs only applied to the value of the Mexican labor on the product.
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