Production Set

How does the company Mattel use free trade agreements to set up production sites in other countries?

Mattel could always set up production sites in other countries regardless of NAFTA or other free trade agreements.

The incentive for Mattel to set up production sites in member countries is that under a free trade agreement, there will be no tariffs to worry about. This means they can build a plant in Mexico, and import the goods back to US without risking a tax on the import. Whereas if they built the plant in a country that wasn’t a member of the agreement, they may have to pay that tarrif. So under the free trade agreement, Mattel can lower their manufacturing cost without raising their tax obligation.

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