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| World Marketplace |
Labor Pains
Elsie Echeverri-Carroll
10/01/2005
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While commercial interests on both
sides of the border benefited from NAFTA and the maquiladora system, the
relationship between the United States and Mexico was often criticized,
particularly north of the border. For the past two decades, U.S. organized labor
has seen Mexico as its primary threat. During his 1992 presidential campaign,
Ross Perot characterized this mood when he quipped of a “giant sucking sound” of
manufacturing jobs departing south to Mexico.
Many believe that
the country’s only hope for competing globally is through
building
a technically skilled labor force, rather than merely a cheap one. |
When NAFTA was being
negotiated in the early 1990s, proponents expected that the newly created
employment opportunities, especially for low-skilled workers, would diminish
migration to the United States. Many in Mexico’s government, and on its streets,
blanched at this, seeing their labor-hungry northern neighbor’s view as somewhat
hypocritical and even racist. Ultimately, maquiladoras could not absorb all the
workers displaced by trade liberalization policies, and immigration failed to
subside in the 1990s. As a result, the U.S.-Mexico border became increasingly
militarized in an effort to control Mexican illegal immigration into the United
States. After 9/11, the issue of border control became even more sensitive.
While China presents the largest threat to the Mexican “maquilinization”
model in today’s economic environment, López Obrador, the leader of the
center-left Party of Democratic Revolution, presents the biggest threat to a
well-honed image of a country friendly to foreign investors. Although the July
2006 presidential election is still some months away, López Obrador possesses a
substantial popular advantage over his rivals. According to current opinion
polls, he is leading candidates from the other major political parties by 10 to
20 points. López Obrador, like presidents Luiz Inacio “Lula” da Silva of Brazil
and Hugo Chávez of Venezuela, is perceived as a leader of the poor people. Many
in the business community fear that, if elected, López Obrador would adopt a
more confrontational style with the United States. Such posturing could occur
within free market rules, as in Brazil, or within a more populist agenda, as in
Venezuela. López Obrador has already criticized the effects of free trade
policies on the poor, but has not directly attacked President Bush or the United
States, indicating that he will probably follow da Silva’s style rather than
Chávez’s agenda. Either way, global capital avoids populism, a fact that could
compound Mexico’s current economic challenges.
Today, Mexico has only one
competitive advantage: Its proximity to the United States allows it to cheaply
ship heavy goods such as automobiles to the U.S. market. While an inevitable
global rise in petroleum prices may eventually lead American and other foreign
manufacturers to reconfigure their supply chains around factories that are
geographically closer to the American market, competition from China, India and
any number of low-wage nations for foreign investment has changed forever the
convenient relationship from which the United States and Mexico both benefited
for so long. This fact is forcing Mexico to address questions that it has long
been avoiding: How can it compete in a more advanced stage of the value-added
chain? How can it offer the global economy more than cheap labor? Many believe
that the country’s only hope for competing globally is through building a
technically skilled labor force, rather than merely a cheap one. In some places,
this transformation has begun. Guadalajara has been called the Silicon Valley of
the South because of its success in attracting state-of-the-art electronics
facilities. This success is due in large part to the presence of seven
universities and several technical institutes that prepare the labor force with
the skills needed to compete with Chinese workers. Interestingly, electronics
companies such as Motorola continue to expand in Guadalajara despite the
opportunities in China.
Mexico can continue to be an opportunity for U.S.
investors, but only if it succeeds in developing an international image as a
country with two essential requisites for competing globally: an energetic,
educated workforce and political stability, regardless of whom is elected as
Mexico’s president next year. Should it fail in either of these arenas, the
commerce-based, U.S.-Mexico marriage of convenience will devolve into nothing
more than tense bickering over border security issues and a host of other
problems that, like in a bad marriage, have no easy solutions and, ultimately,
benefit neither side.
Elsie Echeverri-Carroll is the director of the Economic Development Program,
McCombs School of Business, University of Texas at Austin.
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