Going back to the U.S.-Canada Auto Pact of the mid-1960s, the automobile industry is perhaps the most highly integrated industry in the North American regional economy. At the same time, Isabel Studer, a well-known expert on the North American auto industry from Mexico, argues that the industry has not taken sufficient advantage of the benefits held out by the NAFTA accord to secure its competitive future. Pioneering "just-in-time production" and focusing on intrafirm trade across the two North American internal borders, this highly concentrated industry (identified most closely with The Big Three) was poised to lead the way towards greater gains through integration under NAFTA. Following deregulation, companies invested heavily in Mexico in the 1980s and 90s to bring their plants up to higher technological standards, while benefiting from flexible labor arrangements and low wages. The companies also benefited from the highly efficient and modernized Canadian plants, and their reliable workforce, and Canadian subsidiaries enjoyed a favorable exchange rate for their exports back into the U.S. market. Finally, the Big Three focused on producing a limited product line for the North American market, while the continentalization of the market provided economies of scale.

The Big Three won stringent rules of origin in the NAFTA agreement, which put them in a better position vis a vis Asian competitors, and their strategies helped them weather the 1994-95 Mexican peso crisis. All the same, Studer points out a number of factors undermining this advantageous position moving forward from the mid-1990s. First, Japanese competition continues to threaten the competitive edge of the industry. Second, Mexico expanded its bilateral trade agreements and liberalized access to its market for cars from Europe and Brazil, at the expense of those from its North American partners. Third, the industry remains highly concentrated in the high-cost United States, despite the fears of the ‘giant sucking sound.’ Finally, further integration is stalled because of a lack of regulatory harmonization, and the continuation of the mentality of “national’ markets that politicizes trade and therefore makes the auto industry vulnerable to the protectionist temptation.