The European Community (EC) has embarked on a program popularly referred to as Europe 1992. The aim of the program is to achieve a unified European market that will overcome the economic stagnation and unemployment of the early 1980s and improve the position of EC members in the global economy....

A theoretical model is developed and applied to the North American auto industry, motivated by the possibility of US-Mexico free trade. Special features of the model include (1) significant scale economies at the plant level, (2) imperfect competition among firms, (3) joint ownership of plants...