U.S.-Mexico Trade

Pursuant to a congressional request, GAO provided information on whether wood furniture manufacturers relocated from the Los Angeles area to Mexico under the Mexican maquiladora program to avoid stringent California air pollution standards.

GAO found that: (1) about 1 to 3 percent of all the wood furniture manufacturers in the Los Angeles area relocated to Mexico between 1988 and 1990; (2) 83 percent of a sample of the firms that left Los Angeles for Mexico indicated that high costs for workers' compensation insurance and wages were major factors in their decision to relocate; (3) 78 percent of the manufacturers indicated that California's stringent air pollution control standard for paints and solvents was a major factor in their decision to relocate; (4) wood furniture manufacturers who relocated to Mexico did not have to conform to air pollution control standards comparable to those in Los Angeles; and (5) under the maquiladora program, the Mexican government permited plants to import raw materials, components, and machinery free from import duties, with the general stipulation that the plants export their output.