Prosec Mexico

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Prosec (Program of Sectoral Promotion) is a program started by the Mexican government after the implementation of the North American Free Trade Agreement (NAFTA) to overcome the challenges faced by international factories (maquiladoras)) in Mexico resulting from NAFTA article 3. Article 3 states that no NAFTA member can waive or reduce import tariffs conditioned upon the export of the finished good to another NAFTA country. The result was that after Mexico joined NAFTA the tariff rates for many of the raw materials used by maquiladora manufacturing companies would have risen significantly, particularly for goods of Chinese origin.

North American Free Trade Agreement trade bloc

The North American Free Trade Agreement is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the 1988 Canada–United States Free Trade Agreement between the United States and Canada, and is expected to be replaced by the United States–Mexico–Canada Agreement once it is ratified.

Maquiladora

A maquiladora ([makilaˈðoɾa]), or maquila, is a company that allows factories to be largely duty free and tariff free. These factories take raw materials and assemble, manufacture, or process them and export the finished product. These factories and systems are present throughout Latin America including Mexico, Nicaragua and El Salvador. Specific programs and laws have made Mexico’s maquila industry grow rapidly.

Mexico Country in the southern portion of North America

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Contents

Prosec is a tariff-reduction measure that avoids running into problems with NAFTA article 3 by allowing either foreign or domestic producers, irrespective of whether the finished good is intended for exportation or domestic sale, to petition the government for a reduction or elimination of a tariff rate.

Applicable sectors

Prosec only applies to certain sectors of the Mexican economy including automotive, textile and electronics. [1]

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References

  1. Irish, Maureen (2004). The auto pact: investment, labour, and the WTO. Kluwer Law International. p. 139. ISBN   90-411-2231-1.