When Americans think about free trade and Mexico, we usually think of one thing: the giant sucking sound of U.S. jobs being lost to cheaper labor in the south. We lose, they gain. Our family-wage jobs become their $2 per hour step up from rural poverty; that’s the shorthand summary of what the North American Free Trade Agreement (NAFTA) looks like from our side of the border.
If that story was true at one point, however, it is no longer. Barely ten years since NAFTA was signed, many Mexicans find themselves in a position surprisingly similar to that of American workers: apparently too expensive for international investors, they’re watching their jobs leave the country by the tens of thousands.
For the past twenty years, Mexico has been the premier model of neoliberal reform. The size of government has been reduced and public enterprises privatized; social benefits of all kinds have been slashed, and the country has been opened up to foreign investment with few if any restrictions. For two decades, the national economic strategy has boiled down to one thought: make the country more attractive to foreign investors. Indeed, Mexico has signed more free trade agreements than any other country in the world.
During this period, successive presidents have promised the populace that temporary sacrifice would lead to long-term prosperity. For a number of years following the adoption of NAFTA, the country indeed became a magnet for foreign capital, and employment in export-producing maquiladoras grew rapidly. Only ten years after signing that treaty, however, the country’s fortunes have reversed. Despite every effort to attract foreign capital with low wages and little regulation, Mexico now finds itself overpriced in the world market. Even in the maquiladora factories of the border zone, Mexican workers make $1.50-$2.00 per hour—significantly above the Chinese minimum of 25 cents per hour. The same free trade policies that once promised an influx of export-related jobs now serve as an open door through which the manufacturing base can drain away to lower-wage locales.
Since peaking in the late 1990s, Mexico has lost more than five hundred thousand manufacturing jobs—above all to China. Moreover, the impact of free trade is not limited to the export sector. Even locally owned factories producing for the domestic market have come under increasing pressure from a rising tide of east Asian imports produced at costs that no Mexican firm can match.
One example of the difficulties facing even the most innovative of Mexican enterprises is the Trademh cooperative, which in 2002 became the last bicycle tire producer in the country. If one were looking for a textbook example of local economic development, the Trademh story might serve as a best-case model of how to do things right. International development experts frequently hail the importance of small-scale loans and “micro enterprise” development. ...
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