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Subject: ugnet_: As China Gallops, Mexico Sees Factory Jobs Slip Away
Date: Thu, 4 Sep 2003 22:23:42 EDT
Globlazation 101
As China Gallops, Mexico Sees Factory Jobs Slip Away
By JUAN FORERO
EZIUTLÁN, Mexico — At the Gicsa Corporation, workers hunched over bulky
sewing machines, busily producing stacks of blue jeans for stores like Target and
American Eagle Outfitters in the United States.
But while the company still owns 10 factories filling orders for American
clients in this lush swath southeast of Mexico City, all is not right in this and
the 180 or so other low-wage textile plants packed into this region.
Mexico, long the king of the low-cost plants and exporter to the United
States of products from Ford trucks to Tommy Hilfiger shirts to I.B.M. computers,
is fast being supplanted by China and its hundreds of millions of low-wage
workers.
The competition from China is no doubt hitting American manufacturers as
well, particularly in textiles. But perhaps nowhere are the effects being felt
more keenly than here in Mexico, where the toll in jobs is mounting at a
staggering pace.
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More and more plants like Gicsa — so-called maquiladoras that are allowed to
import components duty free so long as they are assembled for export only —
are scaling back operations or closing altogether. In all, 500 of Mexico's 3,700
maquiladoras have shut down since 2001, at a cost of 218,000 jobs, the
Mexican government says.
As for Gicsa (pronounced HEEK-suh), a Mexican company that now produces a
third fewer jeans than it did two years ago, its work force has shrunk by 30
percent, to 2,500 employees. Company officials say they are pondering what was
once unthinkable: moving to El Salvador, where labor is 22 percent cheaper and
regulations are less stringent.
"We may not go because we like the tortillas and the chilies," Luis Lapuente,
the operations director and an owner, said with a wistful smile as he sat in
a meeting room above the din of the factory floor. "But there are not many
more reasons to stay."
The slide of companies like Gicsa has prompted soul-searching here in Mexico
as this nation of 100 million assesses the last decade under a landmark free
trade pact with the United States and a future of intensifying competition.
Even given the advantages conferred by the North American Free Trade
Agreement, Mexican businesses have watched China become a major exporter to the United
States of increasingly sophisticated goods. Mexico's $67 billion worth of
exports to the United States in the first half of 2003 still top China's, but
just barely.
But China's exports to the United States grew 20 percent last year while
Mexico's remained flat, and China is expected to surpass this country as the No. 2
exporter to the United States (Canada is still No. 1).
Mexican manufacturing continues to lead the way in supplying the United
States with big-ticket items like cars, auto parts, large-screen television sets
and appliances.
But China, which was admitted to the World Trade Organization in 2001, has
displaced Mexico in many important industries, exporting more lamps, certain
computer and electrical components, footwear, plastics, toys and sporting goods.
"Mexico has nearly lost the battle on low-skilled, labor-intensive
industries, where it simply cannot compete with China on labor costs and will likely
continue losing market share," Merrill Lynch said in a recent report.
Business executives here direct much of their ire at President Vicente Fox's
government, saying it has failed to respond as China vigorously pursued
foreign investment. To compete with a country whose labor costs one-fourth of
Mexico's, they say, the government needs to reduce taxes, provide cheaper
electricity, improve roads and curtail corruption.
"Right now, it is like competing in a race, but they are running on land and
you are swimming in the water," said Mario Montes de Oca, owner of the Union
Clothing Company, which has seen sales slip by 25 percent as exports to the
United States tumbled in two years.
China itself, though, is not spared from criticism, some of it bordering on
the xenophobic. Newspapers run headlines like "China: The Enemy to Vanquish,"
and "The Chinese Threat." Some government officials have reacted less than
diplomatically. Fernando Canales, the economy minister, touched off a minor
diplomatic dispute after recently telling reporters that China had "no respect for
human rights" and was "not a country with solid political and economic
institutions."
It has not helped that Chinese-made products like clothing, toys and even
figurines of Mexico's patron saint, the Virgin of Guadalupe, are also flooding
this country.
Chinese officials say they are simply embracing globalization.
"It is natural that there is concern," said Shi Wei, spokesman for the
Chinese Embassy here. "But there should not be so much exaggeration of the economic
threats from China."
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