Maquiladoras Mint Plethora of Labor Disputes Increasingly, US Firms Trying to Outrun Real Estate Costs and Strict Environmental Regulations Are Moving South of the Border. the Exodus and Its Implications Lie at the Heart of Washington's Battle over Free Trade

By Scott Armstrong, writer of The Christian Science Monitor | The Christian Science Monitor, May 21, 1991 | Go to article overview

Maquiladoras Mint Plethora of Labor Disputes Increasingly, US Firms Trying to Outrun Real Estate Costs and Strict Environmental Regulations Are Moving South of the Border. the Exodus and Its Implications Lie at the Heart of Washington's Battle over Free Trade


Scott Armstrong, writer of The Christian Science Monitor, The Christian Science Monitor


IN industrial plants that hug the border here, Mexicans in blue smocks assemble computer chips, glue seals on refrigerator doors, and mill oak cabinets that were once made in the United States.

To many, the plants represent a buoyant vision of the future, an emerging North American economy in which Mexico becomes a production platform for US companies, sowing benefits on both sides of the border.

To others, however, the plants portend pain and pink slips for the American worker - an exodus of US companies south of the Rio Grande.

For the past quarter-century, US firms have been setting up assembly and manufacturing facilities, called maquiladoras, in Mexican border towns. Now the plants lie at the center of the intense debate in Washington over the North American Free Trade Agreement.

Under the pact, the number of US-owned companies operating south of the border is expected to jump; firms are lured not only by the traditional benefit of cheap labor but also access to the Mexican market. But even if the pact doesn't go through, many analysts believe the US presence in Mexico will continue to increase as companies seek cheaper places to produce widgets.

"The free-trade agreement would accelerate the process," says Jorge Carrillo, who has studied maquiladoras at the College of the Northern Border here. "But it will grow with or without the pact."

In the past two years the number of maquiladoras has risen from about 1,500 to 2,000, employing a half million people. Last year they earned Mexico $3.5 billion in foreign exchange, second only to oil.

The US companies operating here, under laws that allow them to import components duty-free, assemble them, and ship the products back to the US, read like a who's who of the Fortune 500: Ford, General Dynamics, AT&T.

There are also plenty of smaller firms, and a growing contingent of Japanese companies (Sanyo, Hitachi, Sony), that assemble TV sets, vacuum cleaners, and medical equipment, stitch shirts, and mold hulls for boats. Companies that service the maquilas are following.

"The trend is that suppliers are now moving into Mexico," says Jodie Williamson, managing editor of Twin Plant News, a trade publication.

Other firms are beginning to arrive that require more than menial labor. Cummins Engine Company, the big Indiana diesel maker, plans to put $24 million into a sophisticated plant to produce crankshafts.

Mexican officials welcome this investment because it will create skilled jobs and refutes the image of Mexico as a backward country with nothing but cheap labor. But unions and other groups in the US fear such moves presage a new genre of corporate defection.

A wage rate that averages $1.40 an hour in the maquilas remains a prime reason for the corporate convoy southward.

But the potential opening of the Mexican market to more US goods and what companies view as onerous regulations in the US can also play a part. In recent years, several dozen furniture manufacturers have left southern California for Mexico and other parts of the Southwest partly because of the region's air-quality rules, the nation's most stringent.

In 1989, Eric Morgan Inc., which employed 300 people making home entertainment centers in the Los Angeles area, moved lock, stock, and table saw to Tijuana. Company brass say environmental rules, high real estate, and other costs stifled expansion.

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Maquiladoras Mint Plethora of Labor Disputes Increasingly, US Firms Trying to Outrun Real Estate Costs and Strict Environmental Regulations Are Moving South of the Border. the Exodus and Its Implications Lie at the Heart of Washington's Battle over Free Trade
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