Looks at a Mexican bicycle tire plant that did everything right and still failed

...GORDON LAFER is an associate professor at the University of Oregon's Labor Education and Research Center...

...The single most important input—rubber—is priced on an international commodity market and therefore costs the same no matter where tires are made...

...In a nation of massive poverty and declining real wages, there is widespread call for new policy directions...

...The same free trade policies that once promised an influx of exportrelated jobs now serve as an open door through which the manufacturing base can drain away to lower-wage locales...

...The End of an Industry When Trademh shut down, it was the last bicycle tire manufacturer in the country...

...The cooperative operated on strict democratic principles, and early in its existence the members voted to require all workers to take classes after their shifts were done...

...It's so frustrating to see the machinery here, to want to work and not to be able to do anything," says Soto Romero...

...The Trademh workers were doomed from the day they started...

...By 2001, three of the four had closed...

...International development experts frequently hail the importance of smallscale loans and "micro enterprise" development...

...Based on past trends, Trademh expected to sell 1.4 million tires in the year 2000, marking a nearly 30 percent annual growth rate.' Instead, the co-op found its sales inexplicably declining and set out to discover why...

...Even the most sympathetic official could not undo the terms of Mexico's commitments to the International Monetary Fund, the World Trade Organization, or NAFTA...

...Our family-wage jobs become their $2 per hour step up from rural poverty...

...In January 2002, the National Association of Bicycle Manufacturers canceled its contract with Trademh, noting that the price difference between domestic and imported tires was too great for it to continue buying locally.° Shortly thereafter, the company surrendered to the reality of international market forces...

...social benefits of all kinds have been slashed, and the country has been opened up to foreign investment with few if any restrictions...

...When that happens, Lopez Obrador and friends will rely, above all, on activists such as the tireless Trademh members to rally support for the country's new direction...

...Thus, the left-of-center PRD has come increasingly to resemble something like Tony Blair's Labour Party...

...Turning to the Service Sector For a brief period, Trademh stood as a shining example of how determined workers could construct a new and dignified life for themselves, their families, and the surrounding community...

...Their commitment was quickly put to the test two months later when the peso was devalued by half, doubling the effective purchase price overnight...

...Trademh activists reported finding tires being sold with a "Made in the USA" stamp in 1997—ten years after the last American bicycle tire factory closed down...

...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...

...Similarly, for a government seeking to maintain political control in a time of decreasing economic opportunity, the safety valve of migration has become more critical than ever before...

...living standards widen rather than narrow...

...Mexico's manufacturing workers are left with an impossible choice: watch increasing numbers of jobs leave the country or lower wage and all other demands on investors to the level of China...

...The Customs Department— whose own officials were suspected of taking payoffs to allow contraband imports— said it was interested in Trademh's documentation, but refused to launch its own investigation...

...Recently, fifteen of Trademh's remaining members formed a new cooperative—this time aimed at providing building and machinery maintenance and repair services for local offices...

...By contrast, Asian tires were coming into the country at a cost of 14 pesos apiece...

...Many have been unable to find work of any kind...

...Business doesn't like it, it's bad for foreign investment, and it's bad for the political system of controlling people...

...In October 1994, with partial financing from a local agency, they ordered the necessary equipment from a European supplier...

...In some cases, careful examination showed a "Produced in China" mark inside the seam of the tire...

...I 0 n DISSENT / Summer 2005...

...7. According to the federal Customs office, import duties on bicycle tires imported from China were eliminated in September 2004, as published in a Resolution published September 14, 2004...

...The government can't stand this—they're afraid their whole system will unravel—so they had to crush it...

...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...

...In some cases, they found tires imported as contraband—arriving in a ship container marked as another good but stuffed with tires...

...It is these, far more than the indifference of bureaucrats, that keeps Trademh's machines idled...

...Trademh's origins date from an early-1990s labor struggle at Tornel, a large tire manufacturer in Mexico City...

...In addition, Trademh became a central force in the surrounding community—sponsoring a sports league, providing construction materials for area schools, and offering free adult education classes open to any member of the community...

...The members gathered together and voted to take on increased personal debt in order to buy the machinery, gambling that their venture would ultimately be profitable enough to pay off the added expense...

...By cultivating smaller enterprises focused on local needs, the argument goes, poorer nations can build up internal markets while strengthening local communities...

...They worked at securing financing, obtaining an appropriate site, and teaching themselves how to run a business...

...At this rate, every bicycle tire manufacturer in Mexico would soon be out of business...

...Indeed, these strategies are specifically promoted as a more stable alternative to exportbased growth...

...Once again, the co-op members have committed themselves to goals of self- and community improvement beyond their own financial well-being...

...Unfortunately, such hopes seem unlikely to bear fruit...

...that's the shorthand summary of what the North American Free Trade Agreement (NAFTA) looks like from our side of the border...

...Yet Mexico's commitment to NAFTA, the WTO, the IMF, and a host of bilateral trade agreements leaves any elected government little room for policy choices...

...This cooperative was a perfect example of such a strategy...

...In this sense, we are witnessing a dramatic speedup in the pace of globalization...

...The years of free-market development have seen the gap between Mexican and U.S...

...In the winter of 2005, he was a visiting faculty member in the Migration Studies program at the Universidad Latina de America in Morelia, Michoacan, Mexico...

...The co-op's destruc8 n DISSENT / Summer 2005 tion has been predictably traumatic for its members...

...Together, these countries represent a formidable economic bloc and may have the power to renegotiate the terms of their relationship to the IMF, WTO, and global north...

...Ultimately, the co-op reduced its cost of production to 23 pesos (approximately $2 US) per tire...

...In other cases, the deception was POLITICS ABROAD more sophisticated, and specifically facilitated by NAFTA...

...For information about Trademh's ongoing efforts, or interest in supporting its new cooperative, please contact: devallyt@yahoo.com 1. The history of Trademh's origins in the Tornel labor conflicts of the late 1980s and early 1990s is from Epifanio Soto Romero, Presidente del Consejo de Administration, and Cesar A. Dominguez-Garcia, Secretario del Consejo de Administración de Trademh, interview with the author, January 27, 2005...

...Virtually the entire price difference is due to labor costs...

...A Path Forward It took more than a hundred years for bicycletire manufacturing to disappear from the United States...

...With the vast improvements in transportation and communications infrastructure, it takes less and less time for any given industry to find the lowest level in the world economy and move its production facilities there...

...At the federal level, even if PRD candidate Andres Manuel Lopez Obrador wins next year's presidential elections, few expect that he will pull out of NAFTA or the WTO or cancel the country's IMF agreements...

...Only ten years after signing that treaty, however, the country's fortunes have reversed...

...When we started succeeding, people in the community saw that it was possible to succeed with an independent organization, not dependent on the bosses or political parties...

...Ultimately, Tornel laid off six hundred employees in a mass firing that crushed the independent union movement...

...It's heartbreaking to visit the Trademh site—to see the results of a bold project, standing just as they were and still ready to be used...

...But the co-op was living on borrowed time...

...For two decades, the national economic strategy has boiled down to one thought: make the country more attractive to foreign investors...

...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...

...and numerous appeals to government officials were rejected...

...We were really scratching glory for a while there," says Soto Romero...

...They canvassed a variety of state and local governments before deciding to settle in Morelia, the capital of the state of Michoacan, about four hours outside Mexico City...

...Thus, "democracy" has come to Mexico at exactly the time when the part of the economy over which citizens exercise democratic control has shrunk dramatically...

...by 2002 it had more than tripled, to nearly $20 million...

...If they do attempt something so bold, they will inevitably face intense political opposition from both domestic and foreign elites...

...Most have drifted away—back to Mexico City or wherever they can find work...

...Despite every effort to attract foreign capital with low wages and little regulation, Mexico now finds itself overpriced in the world market...

...Although the strategy of growth through foreign investment has been largely discredited, the capital flight that would result from breaking these agreements is beyond contemplation by any of the parties...

...The factory workers, who started off sleeping in bunk beds off the factory floor, were now able to get mortgages and bring their families from Mexico City to move into new houses...

...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...

...But the result for Mexican workers is the same...

...by the end of the century this figure had fallen to 11 percent...

...In 1995, Trademh produced its first tire, and the business grew quickly...

...The country's manufacturing workers earned the equivalent of 23 percent of average American wages in 1975...

...During the course of a year, the co-op members themselves did all the construction work 6 n DISSENT / Summer 2005 necessary to build their factory...

...Now, this is no longer a problem of law, and there is no need for Chinese imports to be transshipped through the United States...

...For a number of years following the adoption of NAFTA, the country indeed became a magnet for foreign capital, and employment in exportproducing maquiladoras grew rapidly...

...For Mexico, with a much smaller commercial service industry and much greater need, the prospects are yet more daunting...

...It is not clear that this strategy can work to sustain the millions of Americans in need of family-wage jobs...

...All we wanted was to be able to compete on a level playing field...

...6. Letter to Trademh from Gunter Maerker, representative of the Association Nacional de Fabricantes de Bicicletas, January 22, 2002, shared with the author...

...Because NAFTA had eliminated import tariffs against U.S.—but not Chinese—products, Chinese producers could evade Mexican taxes by shipping products first to the United States and then importing them, duty-free, into Mexico...

...This practice was not legal, but neither was it policed...

...For countries in the middle rank of international economies, this spells bleak times ahead...

...If there is a chance of moving in a more hopeful direction, it almost certainly relies on a Lopez Obrador government's forging an effective alliance with the other left-leaning governments that have recently swept to power in Latin America, almost all of which owe their victories to popular disenchantment with neoliberalism...

...The company produced half a million tires in 1996 and nearly one million in 1997.2 When they began, the workers set a goal of producing a hundred thousand tires per month...

...At the same time, the cooperative dedicated itself to a "social project" in addition to the "economic project" of the factory...

...Trademh's members were up against the simple, brutal fact that poorer or more desperate workers elsewhere were willing to work for less...

...But the union "leaders," who were openly paid by the company, understood their jobs as guaranteeing labor peace for the company and union votes for the ruling party...

...However, this "democratic opening" has come at exactly the moment when democracy is weaker than ever...

...INEVITABLY, Mexico will join the club of Latin American countries now providing fodder for stories about the "disenchantment with democracy" that has set in following a transition to democracy from authoritarian rule...

...The first goal of this project was to improve the education level of the co-op members themselves...

...It is hard to imagine what industry might be able to provide living-wage jobs for the huge number of Mexicans who now need them...

...Since peaking in the late 1990s, Mexico has lost more than five hundred thousand manufacturing jobs—above all to China...

...The terms of international treaties and IMF financing commit future governments to pursue a policy of encouraging foreign investment, cutting social services, and dismantling regulations designed to protect workers or consumers...

...The election of president Vicente Fox in 2000 marked the end of seventy years of oneparty rule by the Institutional Revolutionary Party (PRI...

...The import of cheap Asian tires quickly swamped the market...

...We are not against the free market," explains Trademh president Epifanio Soto Romero...

...The price difference between Asian and domestic tires was all the more striking given the fixed costs of tire production...

...But the newly elected PRD governor is a businessman from Acapulco, presumably left-of-center in his heart but unlikely to enact radical policies...

...As recently as 1998, most of this market was supplied by four domestic manufacturers...

...The size of government has been reduced and public enterprises privatized...

...Trademh cut all possible costs in order to lower its selling price...

...The machinery of production is likewise internationally traded and therefore provides little price advantage to one locale or another...

...3. Sociedad Cooperative de Produccion Trademh SCL., report provided to author...

...Yet these will not come from the PRD...

...Within five years, forty members of the cooperative had completed elementary school, and another forty completed junior high school...

...AT THIS POINT in the story, one might assume that the protagonists, defeated and exhausted, would give up...

...To forge a path that avoids these equally disastrous options, one might hope for a new government that could end the country's twenty-year marriage to neoliberal economics...

...One state over in Michoacan, PRD governor Lazaro Cardenas Batel—grandson of the president who redistributed land to peasants and nationalized the oil industry— trumpets the increase in international exports as a hallmark of his administration's success...

...Indeed, in the fall of 2004 Mexico established new trade terms with China, which lifted import duties on Chinese-made tires.' Thus, while Trademh activists spent countless meetings trying to get government officials to take responsibility for illegal imports destroying local manufacturing, the government found a completely opposite solution to this problem: it legalized the imports...

...Tornel's employees sought to democratize their union, specifically demanding the right to elect their own leaderDISSENT / Summer 2005 n 5 POLITICS ABROAD ship and to force Tornel to respect national wage standards.' Officially, the employees were represented by a government-affiliated union...

...The newspapers, airwaves, and highway billboards are full of competing claims from political rivals, and state and local governments are broadly divided among the three major parties...

...www.caaarem.org.mx . 8. Quoted in Susan Hayward, "Mexico City mayor weathers charges, emerges as '06 front-runner," Knight Ridder, April 28, 2005...

...It is telling that they have been driven out of manufacturing and into the service economy, mirroring the experience of millions of Americans...

...The government didn't want any independent organization of workers to succeed," opines Soto Romero...

...2. Sociedad Cooperative de Produccion Trademh SCL., report provided to author...

...By far the most pressing problems facing the country are economic...

...4. Except where otherwise noted, all quotes from Trademh representatives are from interview with the author, January 27, 2005...

...by 1998 they had reached and surpassed this milestone...

...The seeds of Trademh's destruction had been sown in 1994 with the signing of NAFTA...

...However, despite two years of appealing to myriad state and federal officials, Trademh never received assistance of any kind with this problem...

...To the extent that neoliberal globalization destroys jobs within the country, migration to the U.S...

...As members began questioning customers, the workers discovered a disturbing answer: millions of bicycle tires were being imported from East Asia at prices that no Mexican manufacturer could match...

...Trademh's leaders appealed to federal officials to protect their market against illegal dumping and false certificates of origin...

...In 2002, Trademh turned off its machines and closed its doors, marking the end of a heroic— and briefly triumphant—effort to carve out a dignified life for this group of manufacturing workers...

...After several rounds of elections, in which each of the major parties gets its turn in power but the most fundamental issues shaping daily life in the country go unchanged, cynicism and disaffection with the new system will inevitably increase...

...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...

...Mexican law requires severance pay for fired employees, and Tornel complied with this aspect of the law...

...In 1995, the value of bicycle tires imported to Mexico stood at $6 million...

...But the death of Trademh is determined by something far more implacable than the whim of government officials...

...Mexico is enjoying genuine multiparty competition for the first time in nearly any voter's lifetime...

...Ultimately, an official of the federal Department of Commerce and Industry suggested to Trademh representatives that "if you can't compete with the Chinese, you should close down...

...Although this may overstate the intentions of elected officials, there is a clear logic to this conclusion...

...Here in the rich north, local governments, labor unions, and individual families have largely reacted to globalization by turning away from manufacturing and concentrating on work in the profitable parts of the service industry...

...they just didn't realize it until it was too late...

...police-escorted thugs attacked workers when they tried to cast ballots for an independent union...

...The author thanks Tatjana Rhode, Ricardo Sepulveda, and Manuel Ramirez for assistance in researching this article...

...Mexicans buy nearly twenty million bicycle tires per year...

...Of the 600 employees who were fired for union activity, 125 decided to pool their severance pay in order to form a cooperative enterprise that would produce bicycle tires...

...Moreover, the impact of free trade is not limited to the export sector...

...It's tempting to think that, if the government would just release its hold on the site, the workers could again be back at the machines and the community alive with education...

...DISSENT / Summer 2005 n 9 POLITICS ABROAD Trademh's Soto Romero suggests that the government's solution is for more Mexicans to migrate northward...

...Naming their cooperative Trademh (a Spanish acronym for Democratic Rubber Workers) the 125 members set out to teach themselves how to be entrepreneurs...

...Trademh remained in business so long because it had an unusually strong interest in protecting the jobs of its members...

...Instead, the Tornel employees took their mass layoff as the starting point for an even more ambitious project...

...The on-site classrooms likewise remain unaltered— books on the shelves, chairs at the ready, but no one allowed to use the space...

...5. Statement is from Armand Ortega, representative of Michoacan office of SECOFI, as reported to author by Trademh leaders, Jan 27, 2005...

...Over a period of years, employee activists were threatened, beaten, and kidnapped...

...Indeed, Mexico has signed more free trade agreements than any other country in the world...

...It took only another dozen years for it to disappear from Mexico...

...However, the cost of even the initial stage of such a suit was twenty million pesos—far beyond the reach of this cooperative...

...Three years later, all the machines stand silently in place...

...When the cooperative went bankrupt, the federal government seized its factory in lieu of unpaid hack taxes...

...However, the machines can't be sold to any Mexican company—because no one can afford to produce bicycle tires domestically—and the government has not yet taken the steps needed to find a foreign buyer...

...Lopez Obrador himself has been careful to maintain good relations with business leaders, and stresses that "the change POLITICS ABROAD we're proposing doesn't mean a return to statism...

...Today, the Trademh factory stands as a tesDISSENT / Summer 2005 n 7 POLITICS ABROAD tament to the ravages of free trade policy...

...For the past twenty years, Mexico has been the premier model of neoliberal reform...

...During this period, successive presidents have promised the populace that temporary sacrifice would lead to long-term prosperity...

...Earlier this year, the PRD celebrated its first victory ever in the state of Guerrero...

...Frustrated by the Mexican government's response, Trademh went so far as to consider bringing suit under NAFTA's Labor Accord...

...is increasingly left as the only viable option for millions of Mexican families...

...After constructing the factory, the cooperative built a two-room schoolhouse and cultural center on the adjacent lot...

...If that story was true at one point, however, it is no longer...

...But no matter how it trimmed costs, it could not compete with cheaper imports...