NAFTA - Auto Restructuring and Mexico's Maquiladora Zone

Anti NAFTA protest

1996 Black Flag article on the North American Free Trade Agreement.

Submitted by Fozzie on July 8, 2023

This article was sent to us by comrades in North America, and details how NAFTA is part of a broader agenda by global capitalism to slice up the world and make more profits. It puts telling arguments as to why workers in the north should be in solidarity with those in the south - after all, whose wages are we going to be equalised to by this "free market"?

The author is a member of the Candian Autoworkers Union, the leading private sector union in Canada with a good tradition of internationalism. As a side point, it's worth noting that the CAW has just won agreements from the US Big Three car makers not to contract out production away from core plants. An insight into the CAW can be given by the union's leader, Buzz Hargrave, saying "If you fight, you can win," and "You can't win if you don't challenge managements' rights." It's hard to imagine John Monks or Bill Morris challenging management's rights, or even fighting to win or even fighting. The deal between the union and GM was reached only after a three-week strike but deals were negotiated with Ford and Chrysler.

It's now expected that limits to a corporation's ability to outsource work will now be a key demand by other unions across the country as companies continue to shed workers.

Globalisation and the neo-liberal economic policies which go with it is the major problem facing the international workers movement today. We will continue to examine these themes in future issues of Black Flag.

The North American Free Trade Agreement (NAFTA) is a trilateral treaty designed to transform the North American continent into a single economic zone. It will facilitate the realisation of global economic order that will further entrench an increasingly unhindered global, market based economic system; and further erode, if not preclude, public policy involving significant state intervention in this economic system.

The origins of NAFTA can be traced back to the Reagan /Bush "Enterprise for the Americas" initiative which envisioned the creation of a free trade zone throughout the entire western hemisphere, including the Caribbean basin, Central and South America. NAFTA constituted the next logical step towards that end following the 1988 Canada-US Free Trade Agreement (FTA). The NAFTA treaty was signed on August 12 1992 and began to go into effect on January 1 1994. Superficial and largely ineffective side agreements on labour and environmental issues were also signed and implemented.

To properly understand the significance of NAFTA, it is vital to view it as a means to facilitate a sweeping multi-faceted or multi-tiered process of corporate restructuring within the context of the global capitalist economic system. This is particularly apparent with corporate restructuring in the auto industry throughout North America since the early 1990s. This restructuring has been marked by the widespread implementation of the lean or Toyota production system; the proliferation of non-union, Japanese transplants employing lean production methods; successive waves of plant closures by parts manufacturers and the US Big Three car manufacturers; and the growth of an enormous, export-oriented Mexican car and parts industry which also underwent major corporate restructuring during this period.

Content Rules

The two free trade agreements made changes to vehicle content rules. The 1988 FTA ended the 1965 Canada-US Auto Pact's requirement for a 60% Canadian content in vehicles (in Canada) and replaced it with a 50% North American requirement, with North American defined as US and Canada. NAFTA raised the North American content to 62.5% but redefined North American to include Mexico. These changes made it possible for corporations such as General Motors (GM) to relocate as much of their production wherever they wished in any of the three NAFTA countries without being penalised by tariffs. By giving corporations this unprecedented degree of capital mobility, NAFTA also made it increasingly possible for them to restructure their operations as they saw fit and to engage in corporate whipsawing.

Whipsawing is a practice in which corporations draw workers from different plants into defacto bidding wars by competing with each other for work. In these bidding wars those plants with local unions that accept what leading North American auto executives commonly refer to as "competitive agreements" stand the best chance of either retaining existing work or acquiring new work. These are also called Modern Operating Agreements or Living Agreements (Living agreements can be re-opened at any time with the consent of both parties). Significantly, the most competitive agreements are those with the most contract concessions and in which only the union surrenders its rights.

The car corporations' desire for "competitive agreements" highlights how the lean system of production fits into this scenario. Acceptance of the Toyota or lean system and the contract concessions that go with it are the principal criteria used to determine whether particular plants or operations will continue to operate and /or attract new work. The lean system means continuous restructuring of work processes and specific work operations in pursuit of "continuous improvement" and the corporate objective of eliminating "waste". It specifically involves restructuring focused on the shop floor and at the plant level, with the goals of maximising output with minimal manpower and "rightsizing" or downsizing the workforce (corporate speak for sacking workers).

Corporate whipsawing in the car and auto parts industries enables the car corporations to accelerate the drive to lean production as fully as possible throughout their organisations. This shows that there is a direct and complementary relationship between lean's implementation; phenomena such as the waves of plant closures throughout North America over the past 15 to 20 years(ie GM's announcement in 1991 that it would close 21 plants and eliminate 74,000 jobs) and the implementation of free trade agreements such as NAFTA consciously crafted to facilitate this restructuring of corporations to make them more competitive in the increasingly global economic system.

Understanding the relationship between these things is essential to understanding what has caused the dramatic decline of the United Autoworkers (UAW) union in the US. In 1979 UAW membership stood at about 1.5 million ; now it is only slightly more than half that number. Furthermore the UAW's pitiful decline has been a major cause of the decline of the US labour movement. Today only about 9% of private sector workers belong to a union.

Mexico Factors In

Mexico has factored into this situation principally because the implementation of NAFTA allowed car and auto parts companies to locate as much production as they want in any of the countries that signed the treaty. To consider what this has already meant in very stark terms, reflect on the following statistics:

In 1986 20,500 vehicles were exported northward from Mexico

In 1995 the US Big Three alone exported 385,000 cars and 168,000 trucks northward from Mexico, while Nissan and Volkswagen exported 225,000 northward, out of a total of 778,000 vehicles from Mexico. (38 times the 1986 level)

In 1992, the year NAFTA was signed, auto parts companies (including GM & Ford subsidiaries) exported US$6.4 billion worth of parts northward from Mexico

In 1995, the figure rose to US$9.5 billion.

In the same period, the number of auto parts plants based in Mexico rose form 192 to 210 and the number of workers employed from 156,000 to 210,000.

Approximately 450,000 Mexican workers are now employed in the car and auto parts industries, which now account for 21% of Mexico's manufacturing exports.

Consider the situation at GM's Mexican operations. In 1981 GM employed a Mexican workforce of 7,000. Today it employs about 75,000 in 54 facilities. Furthermore if GM's Mexican operations were a single corporation, it would be the 135th largest in the world. Such developments leave no doubt that GM dramatically expanded the its Mexican operations both before and after NAFTA. In the meantime GM reduced its Canadian workforce by more than one third, from about 40,000 to about 26,000.

In view of these things it is essential to consider the situation of both automotive workers in Mexico and Mexican workers in general, and to see that they face horrendous problems of their own. The principal problems faced by Mexico's workers are the low wages they are paid and the poor conditions they live in. Indeed Mexican workers' wages generally range from as little as US$4 per day to $1.25 per hour. The latter is the rate paid to workers in the US Big Three's assembly operations in Mexico. The particular problems faced by Mexican workers in the industry reveal the very same forces that have eroded the gains made by their US and Canadian counterparts since the 1930s.

An article headlined "Detroit South" in Business Week (March 16th 1992 edition) stated that, "In Detroit's view, Mexico's young workforce adapts more quickly to new industrial regimes than entrenched workers in the Rust Belt," and went on to say that this workforce is "amenable to the manufacturing revolution." Simply stated, Business Week was reporting that Detroit believed Mexican autoworkers were more adaptable to the lean system than traditional US blue collar workers. To further appreciate this, it is only necessary to draw on a brilliant article by Kevin J.Middlebrook entitled "The Politics of Industrial Restructuring: Transnational Firms Search for Flexible Production in the Mexican Automobile Industry", which appeared in Comparative Politics in April 1991. It perceptively starts from the premise that "restructuring in the auto industry is fundamentally a global process" and emphasises that the shift to the construction of export-oriented automotive manufacturing facilities in central and northern Mexico has coincided with efforts to redefine labour relations in the new plants to lower labour costs and limit union influence in the manufacturing process. Notably, auto corporations have taken advantage of the passive unions in the Mexican automotive industry, which are usually linked to the government controlled Confederation of Mexican Workers (CTM). Within the car industry, CTM unions have obstructed efforts to unify workers in different auto plants and in effect allowed the corporations to blackmail workers at older, more established plants to gain greater management flexibility.

A trend has emerged where older plants with better paid workers and more rights often saw their operations restructured or closed, while new, comparatively more lean production facilities were built that employed younger, more poorly paid workers with fewer rights and less, if any, union experience. In short, Middlebrook recognised that workers were being subjected to a phenomenon similar in nature to whipsawing and were on the receiving end of exactly the same type of corporate restructuring which autoworkers in the US and Canada have faced.

Mexican autoworkers and other Mexican labour activists are quick to acknowledge that such things have happened and they see similarities between what has been taking place in the automotive industry there and in the rest of North America.

Some of the most compelling evidence of just how harmful this restructuring has been for Mexican workers can be seen in the rapid growth of car and parts plants within and in close proximity to the Maquiladora Zone and in the conditions of life for the workers in these plants. Many believe the Maquiladora Zone shows what the future holds for the entire Mexican working class, once NAFTA has fully come into effect.

The Maquiladora Zone is located throughout the US-Mexican border region. It is only a few miles wide but it is 2,000 miles long and includes several urban centres which are immediately adjacent or in close proximity to US border cities, both large and small.

There are over 3,100 maquilas or foreign-owned industrial plants producing mainly for export in the Maquiladora Zone. These currently employ more than 670,000 workers and produced 39% of Mexico's exports in 1995.

Besides car and auto parts there are numerous textile, metal and wood products plants and a rapidly growing number of electronics plants especially in Tijuana in north-west Mexico. The transnational corporations that own most of these facilities are only required to pay taxes based on the value added to goods while they are in Mexico.

These transnational corporations profit from employment of workers who are not only paid less than workers elsewhere in Mexico, but receive few, if any, benefits. Most are under 25 and work in plants with no union whatsoever. Those who are in a union are usually represented by the government controlled CTM, whose national leadership has repeatedly agreed to and helped enforce a freeze on workers' wages that holds them far below Mexico's rate of inflation. Nonetheless, it should be pointed out that there are some dissident local unions within CTM. These unions have tried, and in some cases succeeded in functioning like legitimate workers' organisations.

Mexican Labour Law

Another problem workers in the Maquiladora Zone face is that they are kept in the dark about Mexico's progressive but poorly enforced labour laws. Indeed the maquilas have been able to operate outside of Mexico's federal labour law since the 1970s when these plants began to be built in any numbers. They were built to order according to Kathryn Kopinak of the University of Western Ontario in a recently published book about the Maquiladora Zone, "Desert Capitalism". Because the plants operate outside federal labour law, workers in the Maquiladora Zone are routinely denied the right to organise independent unions that are genuinely accountable to them and have even faced police violence when they tried.

Ciudad Juarez is a city of over a million people located next to El Paso, Texas, and has a thriving maquila industry. Few of the workers are unionised and almost all of those who are belong to a CTM union. As a direct consequence of this most strikes in Ciudad Juarez are wildcat strikes organised by temporary coalitions of workers that form around specific issues and then dissolve once each struggle is over.

In 1995 there was a series of wildcat strikes over wages in Juarez. One of these took place at a Zenith plant and another at a Ford plant. Both of these strikes were actively opposed by CTM officials representing the workers in these plants. The CTM had negotiated wage increases for the workers within the limits of the wage freeze. Yet both of these illegal strikes won wage settlements that were superior to what the CTM had negotiated.

Health and safety laws are likewise poorly enforced in the Maquiladora Zone. The situation with hazardous waste materials labelling is indicative of the reprehensible situation that prevails with respect to worker health and safety. The text of the labelling is often only in English. Containers from Canadian firms such as Custom Trim Ltd, of Waterloo, Ontario, have even been found with bilingual labels - in English and French! There is a callous disregard for the health and safety of the young women workers who make up half the workforce in the border region (i.e. unprotected exposure of women of child bearing age to soldering fumes in electronics plants, such as Zenith at Matamoros). Sexual harassment is also overt and rampant throughout the region.

Environmental laws are likewise poorly enforced throughout Mexico and toxic pollution is an extremely serious problem in the Maquiladora Zone. Domingo Gonzalez, a leading environmental activist in the border region and a prominent member of the tri-national Coalition for Justice in the Maquiladoras based in San Antonio, Texas perceptively described the Rio Grande which runs through the border region as a toxic time bomb created by massive poisoning of the water table.

Two incidents that occurred in the early 1990s involving severe toxic pollution dramatise the seriousness of the situation. A sampling taken by the US-based National Toxics Campaign from a ditch next to a GM Fischer Body Bumper plant in Matamoros revealed the presence of the hydrocarbon xyklene in a concentration of 2,700,000 parts per billion, (about 6,000 times the US standard).

The same hydrocarbon was found by the National Toxics Campaign at 53,000 times the US standard behind a Matamoros plant owned by the Stepan Chemical Corporation of Northfield, Illinois. Stepan is arguably the worst toxic polluter in the region, and the Coalition for Justice in the Maquiladoras made a video about it called "Stepan Chemical: The Poisoning of a Mexican Community".

More recently US activist organisation Public Citizen, in an extensive investigation of the environmental crisis in the border region, found that the situation has worsened since NAFTA. The findings disputed the claims of NAFTA's supporters who have consistently tried to argue that the environmental situation would improve as a result of economic development facilitated by the treaty. Most importantly, this toxic pollution is routinely located either in the midst of, or very close to, the colonias or residential districts where the maquila workers live. In some cases ditches with the stench of toxic pollution coming from them run right by workers' houses. The children of these workers play immediately around these ditches as well.

Living conditions and the lack of economic infrastructure have not been seriously addressed since NAFTA. Most workers live in homes that are little or no better than shacks, without heat, running water, acceptable toilet facilities and in some cases electricity. Almost all the roads that run by their homes are unpaved and the colonias in which they are located typically have no garbage collection. One colonia in Matamoros is built over what used to be a rubbish dump. As a result the danger of cholera outbreaks is all too real. These conditions exist in large measure because of the low wages paid to the workers, rapid and uncontrolled economic growth and the fact that the transnational corporations operating in the Maquiladora Zone typically do not pay municipal taxes.

The Peso Crisis

In addition, the immediate economic situation of the workers, many of whom migrated to northern Mexico due to the wide availability of work there, has grown considerably worse since NAFTA, despite NAFTA's supporters' claims that the treaty would produce rising incomes for Mexico's workers. The most immediate cause of this development was the sharp devaluation of the Mexican peso at the end of 1994. Because most of the goods purchased in the Maquiladora Zone are bought with US dollars the purchasing power of the pesos paid to Mexican workers there dropped by about one half. This development was especially brutal because many of these workers were witnessing a sharp drop in the real income of Mexico's workers for the second time in about a decade.

During the 1980s the wages of all Mexican workers were cut roughly in half when the government limited wage increases as part of a package of economic reforms. Those economic reforms were designed to liberalise or restructure Mexico's economy, in response to the country's debt crisis and pressure from the International Monetary Fund. The reforms were meant to make Mexico open for business. In the aftermath of the 1994 peso crisis, it became common for families in the Maquiladora Zone to need at least three wage earners to maintain a subsistence income. At the same time the sharp decline in the value of the peso also yielded a sharp drop in labour costs for employers in the border region and a sudden surge in their plants' profitability. This is in turn stimulated additional foreign investment in the Maquiladora Zone, more uncontrolled economic growth and more corporate restructuring.

In short, the corporate restructuring and greatly increased mobility of capital that were facilitated by the implementation of NAFTA have been, and continue to be, synonymous with the economic and ecological plunder of Mexico's Maquiladora Zone by transnational corporations. These very same corporations, particularly in the auto industry, are relentlessly restructuring and downsizing their operations elsewhere in Mexico, the US and Canada at the expense of workers to become lean and yield a higher rate of profit.

In conclusion, these things illustrate the kind of barbarism that is being wrought in North America by the global corporate agenda, and this barbarism will not be stopped until we understand the forces that are creating it and recognise and act on the need for workers to build a movement of resistance on a multi national basis.

Bruce Allen, Canadian Autoworkers Local 199
Coalition for Justice in the Maquiladoras