The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to production and consumption in every country. To the great chagrin of reactionaries, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe.
Karl Marx, The Communist Manifesto === NY Times Magazine, Aug. 18, 2002 The Free-Trade Fix By TINA ROSENBERG If there is a showcase for globalization in Latin America, it lies on the outskirts of Puebla, Mexico, at Volkswagen Mexico. Every New Beetle in the world is made here, 440 a day, in a factory so sparkling and clean that you could have a baby on the floor, so high-tech that in some halls it is not evident that human beings work here. Volkswagen Mexico also makes Jettas and, in a special hall, 80 classic Beetles a day to sell in Mexico, one of the last places in the world where the old Bug still chugs. The Volkswagen factory is the biggest single industrial plant in Mexico. Humans do work here -- 11,000 people in assembly-line jobs, 4,000 more in the rest of the factory -- with 11,000 more jobs in the industrial park of VW suppliers across the street making parts, seats, dashboards and other components. Perhaps 50,000 more people work in other companies around Mexico that supply VW. The average monthly wage in the plant is $760, among the highest in the country's industrial sector. The factory is the equal of any in Germany, the product of a billion-dollar investment in 1995, when VW chose Puebla as the exclusive site for the New Beetle. Ahhh, globalization. Except . . . this plant is not here because Mexico has an open economy, but because it had a closed one. In 1962, Mexico decreed that any automaker that wanted to sell cars here had to produce them here. Five years later, VW opened the factory. Mexico's local content requirement is now illegal, except for very limited exceptions, under W.T.O. rules; in Mexico the local content requirement for automobiles is being phased out and will disappear entirely in January 2004. The Puebla factory, for all the jobs and foreign exchange it brings Mexico, also refutes the argument that foreign technology automatically rubs off on the local host. Despite 40 years here, the auto industry has not created much local business or know-how. VW makes the point that it buys 60 percent of its parts in Mexico, but the ''local'' suppliers are virtually all foreign-owned and import most of the materials they use. The value Mexico adds to the Beetles it exports is mainly labor. Technology transfer -- the transmission of know-how from foreign companies to local ones -- is limited in part because most foreign trade today is intracompany; Ford Hermosillo, for example, is a stamping and assembly plant shipping exclusively to Ford plants in the United States. Trade like this is particularly impenetrable to outsiders. ''In spite of the fact that Mexico has been host to many car plants, we don't know how to build a car,'' says Huberto Juarez, an economist at the Autonomous University of Puebla. Volkswagen Mexico is the epitome of the strategy Mexico has chosen for globalization -- assembly of imported parts. It is a strategy that makes perfect sense given Mexico's proximity to the world's largest market, and it has given rise to the maquila industry, which uses Mexican labor to assemble foreign parts and then re-export the finished products. Although the economic slowdown in the United States is hurting the maquila industry, it still employs a million people and brings the country $10 billion a year in foreign exchange. The factories have turned Mexico into one of the developing world's biggest exporters of medium- and high-technology products. But the maquila sector remains an island and has failed to stimulate Mexican industries -- one reason Mexico's globalization has brought disappointing growth, averaging only 3 percent a year during the 1990's. In countries as varied as South Korea, China and Mauritius, however, assembly work has been the crucible of wider development. Jeffrey Sachs, the development economist who now directs Columbia University's Earth Institute, says that the maquila industry is ''magnificent.'' ''I could cite 10 success stories,'' he says, ''and every one started with a maquila sector.'' When Korea opened its export-processing zone in Masan in the early 1970's, local inputs were 3 percent of the export value, according to the British development group Oxfam. Ten years later they were almost 50 percent. General Motors took a Korean textile company called Daewoo and helped shape it into a conglomerate making cars, electronic goods, ships and dozens of other products. Daewoo calls itself ''a locomotive for national economic development since its founding in 1967.'' And despite the company's recent troubles, it's true -- because Korea made it true. G.M. did not tutor Daewoo because it welcomed competition but because Korea demanded it. Korea wanted to build high-tech industry, and it did so by requiring technology transfer and by closing markets to imports. Maquilas first appeared in Mexico in 1966. Although the country has gone from assembling clothing to assembling high-tech goods, nearly 40 years later 97 percent of the components used in Mexican maquilas are still imported, and the value that Mexico adds to its exports has actually declined sharply since the mid-1970's. Mexico has never required companies to transfer technology to locals, and indeed, under the rules of the North American Free Trade Agreement, it cannot. ''We should have included a technical component in Nafta,'' says Luis de la Calle, one of the treaty's negotiators and later Mexico's under secretary of economy for foreign trade. ''We should be getting a significant transfer of technology from the United States, and we didn't really try.'' Without technology transfer, maquila work is marked for extinction. As transport costs become less important, Mexico is increasingly competing with China and Bangladesh -- where labor goes for as little as 9 cents an hour. This is one reason that real wages for the lowest-paid workers in Mexico dropped by 50 percent from 1985 to 2000. Businesses, in fact, are already leaving to go to China. http://www.nytimes.com/2002/08/18/magazine/18GLOBAL.html
