Posted on 20/12/2001
Corporates
Join China In Race - To Bottom
by William Greider
China is sucking away Mexico's jobs. And jobs from Taiwan and
South Korea,
Singapore and Thailand, Central and South America, and even
from Japan.
Globalization is entering a fateful new stage, in which the
competitive
perils intensify for the low-wage developing countries much
like the
continuing pressures on high-wage manufacturing workers in the
United
States and other advanced economies. In the "race to the bottom,"
China is
defining the new bottom, in to which the `global economy' is
falling.
This turn of events is difficult to see against the gathering
threat of
global recession, but in the long run it will be more meaningful.
As one
economy after another sinks into contraction, output subsides
nearly
everywhere--more layoffs and closed factories, more unsold goods.
So the
migration of production to China will not become fully apparent
until after
the recovery, when some of the closed factories never reopen.
While it is
impossible to know the full dimensions at this point, the downdraft
on
wages and competing economies induced by China's ascendancy
may produce a
terrible reckoning. For many poor nations that thought they
had gained a
foothold on the ladder, the reversal will be quite ugly.
This is the "treadmill" that ensnares developing countries--writ
large. If
they attempt to boost wages or allow workers to organize unions
or begin to
deal with social concerns like health or the environment, the
system
punishes them. The factories move to some other country where
those costs
of production do not exist.
In Mexico, the manufacturing wage level rose a bit in the last
couple of
years and is now around $1.50 an hour. In China, it is 20-25
cents an hour.
After NAFTA, Mexico's manufacturing base expanded robustly year
after
year--except that most new factories are located in the maquiladora
export
zones along the US border and in the interior, essentially separate
from
the Mexican economy and largely producing components for US
multinationals.
Yet Mexico may already have peaked as an emerging player in
global
manufacturing. Its manufacturing base is now shrinking, due
first to the US
recession but also because the factories are leaving. American
companies
that were cheerleaders for NAFTA back in 1993 are shutting down
and moving
to greener--that is, cheaper--pastures. An American source in
multinational
business explained the trend: "When you consider the wage difference,
moving the factory, which was usually leased anyway, or moving
the more
value-added product lines is a veritable no-brainer, if you
want to
increase profits. I expect this to intensify over the next few
years,
leaving considerable excess capacity and unemployment, particularly
in
northern Mexico but also in Central and South America, and the
Caribbean."
During the past year, employment in the maquiladora industries
fell by 12
percent, more than 170,000 jobs from the peak. The number seems
modest by
American standards, but those jobs have been the core of positive
growth.
The maquiladora sector produces about one-third of the nation's
hard-currency income from abroad--the dollars that support its
foreign
borrowing--and so its loss could contribute to yet another currency
crisis.
The export-zone wages may seem pitiful to Americans (and to
many Mexicans),
but they are virtually the only bright spot in job development.
Poignant evidence of Mexico's dilemma is the fact that the government
has
slapped antidumping duties of 189 percent on electronics imports
from
China. Electronics was supposed to be one of Mexico's bright
spots,
remember, but Mexico now claims China is exporting its surplus
output at a
price below what it costs in
China. Guadalajara, a production center for dozens of US technology
companies,was down 16 percent in exports and lost 15,000 jobs
in the first
half of the year, according to Business Week. When US steel
companies
pursue anti-dumping remedies, the free-trade orthodoxy disparages
them as
backward protectionists, blocking the future for poorer countries.
But
Mexico is still very poor itself and feeling the same squeeze.
Mexico's top
three steel producers, incidentally, are all in grave financial
trouble,
like the American companies, and for the same reason. Worldwide
overcapacity drives down steel prices and rewards the lowest-wage
producer--China.
In Mexico, other shrinking sectors include shoes, tires, apparel
and auto
parts. The Big Three are moving auto components to China from
both Mexico
and the United States. General Electric, which over the years
has moved a
lot of US jobs to Mexico, is now moving production of mini-bar
refrigerators from there to China. An executive of SCI Systems,
which
employs 10,000 in Guadalajara, told Business Week: "I'm an absolute
believer in this country, but anything that is really price-sensitive
is
considering moving lock, stock and barrel to Asia."
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