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

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 contrast, 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 northern 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.