After working 13 hours in a plant in Reynosa, Mexico, Sonia Rodriguez trudges through ankle-deep mud as she enters her ramshackle neighborhood in pitch darkness. She is paid $33 a week to assemble seat belts in a maquiladora, or assembly plant, owned by TRW Inc. She grimaces at what passes for a street and says, “This thing-what’s it called, free trade?-I hope it means they’ll pay me what they make in the United States. I’d work less overtime and I could come home in daylight.”
It’s a modest desire perhaps, but for Mexico and its reform-minded President Carlos Salinas de Gortari, this thing called free trade carries enormous implications. If an agreement is worked out with the United States, Mexicans hope U.S. companies will infuse $25 billion in new capital into their depressed country by 1994, producing new jobs, higher wages and generally elevating the country’s standard of living. For the United States, the Bush administration says that by eliminating trade barriers U.S. companies will gain access to a huge new market that will create thousands of jobs at home, helping pull the country out of the recession.
These grand visions undoubtedly contain some elements of hype (page 45), yet the proposed free-trade agreement (FTA) has worried organized labor and many environmentalists. They have contended that Mexico’s low wages-and looser enforcement of environmental regulations will lure U.S. companies to move more operations there, costing jobs and inflicting new environmental harm on Mexico. And while some U.S. workers and industries, like chemicals and plastics, would likely gain business under free trade, others, like apparel and sugar, would lose (page 44).
As usual in these issues, the big winners are the Washington lobbyists, Big business and the AFL-CIO have mounted extensive campaigns to woo Congress. At issue is a vote on a process called fast track, which allows the president to negotiate trade treaties and present them to Congress for a straight yes-or-no vote only. This process will be renewed on June 1 unless either house of Congress rejects the extension. A trade pact with Mexico, which could take anywhere from six months to more than a year to negotiate, would be doomed without the fast-track procedure. Last week House Majority Leader Richard Gephardt endorsed the fast-track process, virtually ensuring its passage.
Like Sonia Rodriguez, most Mexicans eagerly await a trade agreement with the United States. In this country the most ardent supporters live in the South. Here are two reports from the trade front, one from the Mexican cities of Tijuana and Monterrey, the other from San Antonio, Texas:
Doing business with Americans won’t be new to Tijuana’s Raul Avila. Five mornings a week, Avila drives from his middle-class neighborhood overlooking the Pacific to Mattel Inc’s Mabamex plant, where in peak seasons nearly 2,500 workers turn out Barbie-doll houses and Disney teething rings. The 48-year-old director of industrial relations has worked for Americans for half his life, in border towns from Ciudad Juarez to Mexicali and Tijuana. Like many members of Tijuana’s burgeoning middle class, he has long ignored the Mexican protectionism that free trade would soften. “I always buy my food and clothing and everything in the U.S.,” he says.
A free-trade zone of sorts already exists along the U.S.-Mexico border. Since the mid-1960s U.S. companies have been setting up maquiladoras in Mexico and shipping the tariff-free products back to American markets. The system has produced a boom of U.S. investment and trade in a 2,000-mile swath of Mexico stretching east from Tijuana to Monterrey and Matamoros. Most maquiladoras dot the border region, earning Mexico $3.5 billion in foreign exchange last year-second only to oil-and employing 400,000. Tijuana’s population has more than doubled since 1980, but unemployment, which runs as high as 20 percent in some Mexican cities, is under 2 percent. In Monterrey, another of Mexico’s more prosperous First World cities, workers earn about three times the Mexican minimum wage.
But along with that success has come problems that could confront all of Mexico under a free-trade agreement. Some Mexicans worry that the onslaught of American companies will overrun their own businesses. At Visa, Mexico’s major beer producer, free trade conjures up images of looming U.S. brew titan Anheuser-Busch, whose advertising budget alone exceeds Visa’s total annual beer sales. “The Mexican companies that have enjoyed state protection and continue the tradition of paying little attention to the customer will lose,” says Edmundo Escobar, while he pores over a U.S. productivity manual on his job as a manager for a Monterrey household-cleaning-products maker. Vitro, a local glassmaker, is busy probing the U.S. company it bought last year to learn how Yanqui competition ticks. “When free trade was announced last year, everyone here immediately thought, ‘Wow, I’m going to have access to the world’s largest market’,” says Hector Moreira, director of the Monterrey Technological Institute’s Strategic Studies Center. “Now with the FTA approaching reality, it has suddenly hit home that this is a two-way street.”
Or a two-way pipeline. One of the biggest free-trade-era proposals calls for a $2 billion gas line designed to carry U.S. natural gas from Texas to California. Both boosters and critics of the free-trade bill find lessons in the duct. Critics note that it will run through Mexico to save money and escape Environmental Protection Agency headaches. Boosters point to the jobs and investment.
FTA supporters argue that an agreement would boost Mexican factory wages, now one seventh of those in the United States. But in the border area, holding a job does not always mean living well. Many workers in crowded Tijuana must live in shantytowns that dot the hillsides around the city. A doctor employed by Deltec, a San Diego electronics firm with a Tijuana maquiladora, sees maladies ranging from malnutrition to parasites. In Reynosa, workers listen to Texas radio-station ads extolling their plants, and wonder when they will get a sewage system in their neighborhood.
Pollution problems have helped turn the “Miracle of the North” into an environmental cesspool. A report issued last week by the National Toxics Campaign tested water at 23 border locations. In one river alone, 100 toxins were found-including 13 of the 16 hazardous materials used by nearby factories to make printed circuit boards.
Environmental officials argue that free trade will actually improve the environment because of increased scrutiny. “New firms coming into this country under free trade will face very strict environmental codes,” insists Mexican Trade Secretary Jaime Serra Puche. Mexico has been notoriously lax in enforcement. But it recently hired 50 new inspectors for the northern states-up from only 10-and it shut down nine border maquiladoras in the past few weeks. Critics contend these actions were done merely to appease Congress.
The plan’s opponents say that Salinas’s future looks too much like Mexico’s past. Opposition leader Cuauhtemoc Cardenas dubs the FTA “neo-Porfirismo,” after 19th-century dictator Porfirio Diaz, a notorious patsy for U.S. companies. Though the criticism is simplistic, it could come true should the FTA not deliver. If its northern border is any indication, Mexico may have to suffer through more of the 19th century in order to enter the 21st.
San Antonio has always been viewed as the weak sister of the big regional centers of Houston and Dallas. While it could boast of a lovely river walk, Dallas was showing off a powerful dual-hub airport and Houston a pulsing port. But with a free-trade agreement, this city of 936,000 people happens to be in the right place at the right time. San Antonio is the most Mexican of any U.S. city that does not sit directly on the border. Upper- and middle-class Mexicans travel here in droves to shop. One of the city’s two newspapers (the San Antonio Light) publishes a daily weather map that includes all of Mexico. The city’s leaders, many of them bilingual, are as conversant with polities and business in Mexico City as in Washington. It’s little wonder, then, that San Antonio’s leaders see free trade with Mexico as something of a crusade. They say San Antonio would be the bustling neck of a huge hourglass, funneling goods northward from Mexico for redistribution throughout U.S. markets. Says Alfonso Martinez-Fonts Jr., president of Texas Commerce Bank of San Antonio: “It’s not as if Detroit, Chicago, Cleveland and New York are going to shut down overnight and move to Texas, but we are the beneficiaries of a geographic accident.”
Of course some accidents have to be helped along. Business leaders formed Texans for Trade Expansion, and began pelting Congress with pro-trade arguments. Business ties have also been strengthened. Southwestern Bell is a key partner in the investment group that recently purchased TelMex, with an eye toward upgrading Mexico’s antiquated phone system.
Amid the boosterism, San Antonians recognize that the marriage of First and Third World economies won’t be simple. “Some jobs initially will be lost, and that’s a tough sell if you’re the guy losing the jobs,” says Tom Frost, chief executive officer of Cullen/Frost Bankers, Inc. But supporters, pointing to a report by the Federal Reserve Bank of Dallas, argue that plants moving to Mexico would have otherwise gone across the Pacific. Says Frost, “When such jobs do go to Mexico instead of Asia, it means more purchases of U.S. goods.”
Some Texans-San Antonians especially-believe that part of the opposition to free trade stems from class and racial prejudices perpetuated by negative video images. But Texans have long developed an extensive pattern of relationships with Mexico. Take Pace Foods, which makes a zesty picante sauce that has ridden the Mexican food craze to markets in all 50 states. The San Antonio company uses 26 million pounds of jalapeno peppers a year, much of it purchased from farmers along Mexico’s Gulf and Pacific coasts. Besides paying import tariffs on its raw materials, the company must overcome delays of hours and even days as trucks await border clearance to enter the United States. Ron Sands, Pace’s chief operating officer, believes a trade pact would eliminate such problems-and even open up a market for his product in Mexico. When the company took 250 cases of its salsa to Mexico City to film a TV commercial last fall, a store owner sold it all within weeks. Facing a tariff up to 20 percent, Pace decided for now not to sell there-but with free trade, that could change. “It may sound like selling oil to the Arabs, but the evidence shows us it will work.” If he’s right, it will be another example of unforeseen new markets south of the border-and another spicy argument for the proponents of free trade.
A trade pact would sting some U.S. industries and boost others. The effects are being debated, but these are some areas where analysts are already placing bets:
Mexican industry will be looking to expand; American banks can profit if allowed to help.
As Mexico modernizes, much of the equipment for new factories will come from the United States.
The Mexican cattle industry requires lots of grain, and Midwestern farmers can supply it.
Fruit crops can flourish south of the border, which could put the squeeze on domestic growers.
FTA opponents contend that others will follow 28 L.A. makers south to flee tough air-quality standards. Clothing: Some American garment plants will close. In this labor-intensive industry, low-wage workers have the edge.
