A Marriage of Convenience
DRAPER, ROGER
Writers & Writing A MARRIAGE OF CONVENIENCE BY ROGER DRAPER MOST INTERNATIONAL trade and investments is conducted among the biggest players: the United States, Japan and the European...
...The most important such theory and the one most often heard during the ratification debate last year—the theory of comparative advantage—suggests that every nation ought to concentrate on the industries that permit it to produce at the lowest cost...
...They pay lower wages than Mexican manufacturers do and, as a result, have very high turnovers...
...Japan's alliance with the Asian "tigers," like the EC's connection to several formerly Communist nations, is founded upon ties that are not only economic but also cultural...
...De la Madrid elected instead to hitch his star to what the authors call the "neoliberal" strategy: a revival of classical 19th-century liberalism that called for encouraging foreign trade by opening up the economy to foreign competition and participation, devaluing the peso, keeping down salaries, and cutting subsidies to domestic producers...
...Unfortunately, our relationship with Mexico is not among them, and that gives the book a certain incoherence...
...On the other hand, they relieve employers of the need to pay higher salaries to attract more Americans to those jobs, and they compete solely with the poor...
...Despite the opening of many new U.S.-owned plants, unemployment rose—in part because of their greater efficiency, in part because almost a million job hunters enter the market every year...
...The authors, however, oppose the compact...
...The borderland firms that supply the maquiladoras do not, it seems, hire many people or pay good wages...
...But is our national interest really the interest of companies that boast of being transnational...
...Each, though, has in some measure sought to redirect its global commerce toward less highly developed partners...
...For decades after his overthrow, the government strenuously limited direct foreign investment in the economy and imposed an "import substitution" policy designed to promote the emergence of certain domestic industries by protecting them against foreign competition...
...The pace quickened in 1965, when Mexico decided to let foreigners own assembly operations near the U.S...
...between 1940 and 1975 the economy grew by an annual average of 6 per cent...
...To some degree that might have been accomplished simply by our insisting that Mexico enforce its own laws...
...How does cross-border trade affect the country as a whole...
...Moreover, the fact that so much anti-immigrant sentiment is racist in character means that ignoring it completely would, the authors warn, "assure continued widespread U.S...
...corn and beans will ruin most of Mexico's subsistence farmers—for example, the peasants now rebelling in the southern state of Chiapas—long before new manufacturing could absorb them...
...Like the Mexican side of the boundary line, its U.S...
...Yet even then Mexican wages, conditions and standards would have been radically lower than ours for the foreseeable future...
...Approximately 2,100 factories, called maquiladoras, now exploit this system of mutual customs forbearance...
...Consider the subject of illegal immigrants...
...During the long dictatorship of Porfirio Diaz (1876-1910), Yankees controlled the country's large-scale industry...
...President Clinton seems to be emulating his predecessor...
...President Bush seems to have embraced nafta to help his Mexican opposite number, Carlos Salinas, politically, not for any economic reason...
...They assume, of course, that complex manufacturing processes will stay here...
...Hence Bush's support for Salinas, who has moved less aggressively to end the PRI's near-monopoly on power than to change its economic philosophy...
...But the true nature of that course is more debatable than Barry, Browne and Sims appear to realize...
...Presidents Ronald Reagan, George Bush and Bill Clinton all professed to be promoting free trade, and the book takes the claim seriously, for it provides an elaborate critique of free trade theories...
...In 1982, alas, the price of oil collapsed, and Mexico, a major producer, could not pay its debts or fund its budget...
...On the one hand, the authors note, these people use government services less than citizens do, provide a desirable element of youth in an aging population, and often take jobs that natives disdain...
...In many matters it is not hard to reconcile contemporary liberal and prolabor positions, as the authors attempt to do...
...As against Mexico, for instance, we might have a comparative advantage in the manufacture of many products that we did not have against our world-class competitors...
...notwithstanding their dislike of nafta, they do not reject the basic concept of a North American trade alliance that would help Mexico escape its destitution...
...Still, few businesses actually did that until about 30 years ago...
...To many Americans in and out of government, the democratic and neoliberal National Action Party (PAN) was an attractive alternative...
...Further, whatever factories are built in the long run will have to be financed mainly by Americans...
...If the American stake in Mexico is identical with that of businesses hoping to set up shop there, it may well make sense...
...And on the Rio Grande, at least, the neoliberal belief "that economic growth and a clean environment go hand in hand" has been dramatically discredited...
...Since 1930, American companies have been allowed to bring home duty-free goods assembled abroad with U.S...
...In truth, says the book, the electronics and automobile industries, whose Mexican plants "increasingly feature high-tech production systems," employ half the workers and generate half the wages in the maquiladoras...
...Given their ambivalence, it is not surprising that the authors have nothing concrete to suggest...
...Our own bloc, formalized by the North American Free Trade Agreement (NAFTA), lacks this advantage...
...counterpart is the region most affected to date by mutual trade and investment flows...
...Today the disequilibrium between the two societies endures...
...But our neoliberals—under the Republicans and, now, the Democrats—contend that the relocation to Mexico of low-wage assembly operations serves the national interest by making U.S...
...border and to exempt them from Mexican duties on imported inputs for anything that was later exported...
...For although the U.S...
...in 1990, after 20 years of frantic growth in Juarez, across the river, El Paso's per capita income was 35 per cent below the Texas mean...
...resembles Canada to an extent that is almost unique, it is uniquely different from Mexico, and this antagonism dates back to their respective foundings...
...But on this question, as on the question of illegal immigrants, Barry, Browne and Sims have difficulty harmonizing their liberal sentiments with their prolabor ones...
...The United States took the neoliberal road before Mexico did...
...They attempt to square the circle by arguing that the agreement should have gradually "leveled up" differences in wages, working conditions, and environmental standards...
...From 1981 to 1992, real wages in Mexico fell by 20 to 40 per cent...
...companies more competitive...
...Indeed, with a border of 1,952 miles and a large settled Hispanic population that makes it easy for Mexicans to blend into the scenery here, it is hard to imagine what, short of police state methods, could keep them out...
...El Paso, another Texas border city, had a per capita income 22 per cent below the state average in 1975...
...We permanently consolidated our status as Mexico's national enemy in 1848 by forcing it to cede almost half its land—land, to be sure, that it had never really controlled...
...Writers & Writing A MARRIAGE OF CONVENIENCE BY ROGER DRAPER MOST INTERNATIONAL trade and investments is conducted among the biggest players: the United States, Japan and the European Community (EC...
...In any case, the authors rightly note that nafta itself is of relatively little importance...
...inputs, except for the cost of the foreign labor and materials used in the process...
...Miguel de la Madrid, the incoming President, was struck by the wealth South Korea and Taiwan had accumulated by concentrating on exports...
...Today, we judge Mexico by its willingness to sustain a favorable environment for U.S...
...Though not neoliberal, the authors are liberal...
...The proponents of nafta claim it will prepare the way for an alternative solution by fostering the creation of new jobs in Mexico...
...Besides, the end of tariffs on U.S...
...In their cases investment was controlled and to some extent provided by the state, but the oil crisis made it impossible for Mexico to follow that route...
...This development was not seen as a change in philosophy, because its effects were localized and did not compromise the larger goal of import substitution...
...investors, and it surely would be more truculent if it were more democratic...
...It is also one of the poorest sections of the country...
...In other respects, too, the results of Mexican neoliberalism were "hardly awe-inspiring": The per capita Gross Domestic Product has gone up in recent years by 1.3 (1989), 2.4 (1990), 1.5 (1991), and 0.4 percent (1992...
...Mexico has come to accept this, albeit not without difficulty...
...McAllen, Laredo and Brownsville—Texas border towns that serve as transshipment points for maquiladora-bound goods—have unemployment levels that are always among the nation's highest...
...firms to employ low-paid Mexican workers has certainly depressed the earnings of many Americans...
...The ability of U.S...
...But the PRI's conversion to neoliberalism has put the matter in a new light...
...They point to South Korea and Taiwan, whose booming exports to the United States spawned cultural ties that actually encouraged emigration...
...On the whole, the strategy was quite successful...
...Arguments can be adduced for and against this principle, but in my opinion they have no relevance to nafta, which, far from advancing free trade, actually created an exclusive economic bloc...
...Placing trade with Mexico on special terms prevents goods and services from gravitating to the most efficient centers of production, as free trade theory urges...
...For decades, the Mexican government and its political embodiment, the Institutional Revolutionary Party (PRI), flaunted their independence by irritating Washington on military and foreign policy questions...
...fears of an uncontrolled 'invasion'" and perhaps bring about the sort of far Right revival we have seen in Europe...
...At no other international border," observe Tom Barry, Harry Browne and Beth Sims in The Great Divide: The Challenge of U.S.-Mexico Relations in the 1990s (Grove, 452 pp., $25.00), "are the contrasts so striking...
...the parties have been committed to their present course for years...
...Like de la Madrid's espousal of neoliberalism, these increasingly close political relations were a great historical novelty...
...Other than labor, almost everything they use comes from abroad, so they have little impact on the rest of industry...
Vol. 77 • July 1994 • No. 7
