What is globalization?
Charles Hill's Global Business Today states globalization is the trend toward a more integrated global economic system. There are two types of globalization; globalization of markets and globalization of production. The latter relates to maquiladoras in that the parent companies "source goods and services from different locations around the globe to take advantage of national differences in the cost and quality of factors of production."
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The Mexican government attracts foreign corporations by allowing plants built around 10 miles from the border to be only subject to value added to the raw materials shipped across the border and also be exempted from import duties. They then made owning a maquila in Mexico easier.
"Faced with mounting global competition,
especially from Japan, US firms increasingly farmed production offshore. During
the mid-1960s, Mexico's BIPsought to capture this market, by allowing foreign-owned
firms to contract with in-bond production plants located within 10 miles of
the border. These companies were exempt from import duties. Firms were only
taxed for value-added to products.
A progressive relaxation on restrictions (on border location in 1971; non-Mexican ownership in 1972) encouraged more firms to shift production to Mexico. Foreign ownership of a maquiladora can be established through a formal trust with a Mexican bank."