MACI - International Trade - The Good, The Bad, and The Ugly Lesson

International Trade - The Good, The Bad, and The Ugly

NAFTA and Maquiladoras

The North American Free Trade Agreement (NAFTA), was a 1994 economic agreement between Canada, the United States, and Mexico that eliminated or reduced the tariffs, taxes, and quotas between the countries. Theoretically, the agreement allows more corporate investments across borders and increases foreign ownership of business facilities. As a result, it stimulated a shift in the location of industrial activity and in the migration patterns of people in Mexico. Capitalizing on the old industrial locations of northern Mexico, such as Monterrey, corporations started to relocate manufacturing plants from the United States to the Mexican side of the border to take advantage of Mexico's low-cost labor. The aspect of cheaper labor was a benefit that the corporations thought would bolster corporate profits and reduce product costs. Since the United States is one of the world's largest consumer markets, it was thought that these manufacturing plants, called maquiladoras (also known as maquilas), could benefit both countries.

Maquiladoras are foreign-owned factories that import most of the raw materials or components needed for the products they manufacture, assemble, or process with local cheap labor, and then they export the finished product for profit. Although most maquiladoras are located near the US-Mexican border, additional factories are located around Monterrey and other cities with easy access to the United States.

Thousands of maquiladoras flourish along the US-Mexican border, although the Mexican government has also promoted maquiladoras in other parts of Mexico. Maquiladoras provide jobs for workers in Mexico and provide cheaper goods for US consumers. However, this system has inherent problems. Labor unions in the United States complain that the high-paying industrial jobs that support the US middle class are being lost to cheap Mexican labor. Labor laws in Mexico are less rigorous than US laws, allowing for longer work hours and fewer benefits for maquiladora employees. In addition, pollution standards in Mexico are not as restrictive as those in the United States, giving rise to environmental concerns. The central US-Mexican border region has dry or arid type B climates with fresh water in short supply, and water is in high demand in industrial processes. With the rapid increase in employment along the border, many of the people who work in the factories do not have adequate housing or utilities. Extensive slum areas have grown around maquiladora zones, which have little law enforcement, high crime, and few services.

The US-Mexican border region has become a strong pull factor, enticing poor people who seek greater opportunities and advantages to move from Mexico City and other southern regions of Mexico to the border region to look for work. When they do not find work, they are tempted to cross the US border illegally. The United States is considered a land of opportunity and attracts immigrants—both legal and illegal—from Mexico. For political and economic reasons, the main US political parties have been hesitant to seriously address the problem of the millions of illegal immigrants.

Critics of NAFTA claim that the term free trade really means corporate trade. NAFTA is also viewed as a component of globalization in the form of corporate colonialism, which only benefits those wealthy enough to hold investments at the corporate level. The exploitation of cheap labor has caused undue immigration across the US-Mexican border, bringing millions of illegal workers into the United States. The Mexican government has not adequately addressed Mexico's economic conditions to provide jobs and opportunities for the people or to use the wealth held or controlled by the elite minority to enhance economic opportunities for the middle- and lower-class majority.

 

Illegal Drug Trafficking in Mexico

The illegal drug trade is a multibillion-dollar industry, and Mexico has traditionally been the transitional area or stop-off point between the South American drug producing areas and entrance into U.S. markets. Cocaine, marijuana, and heroin were produced in the Andes Mountains of South America and shipped north to the United States. Colombian cartels were once the main controllers of illegal drugs in the Western Hemisphere, but in recent decades, organized crime units in Mexico have controlled the drugs coming through Mexico, making deals with their South American counterparts to become the main traffickers of drugs into the United States, and the influence and power of Mexican drug cartels has increased immensely since the demise of the Colombian cartels in the 1990s. Enormous profits fuel the competition for control. Just as the United States has declared a war on drugs and has used its Drug Enforcement Administration (DEA) as a main arm in combating the industry, Mexico has had to address its own issues in the illegal drug trade.

Illegal drug income flowing into Mexico has become a major part of the economy in specific areas. Drug kingpins have used their economic power to buy off local police forces and silence opposition. They have also been known to provide poor neighborhoods with funding for services that would normally be designated as government obligations. These actions have often provided a mixed reaction within the population in local areas. The drug cartels have become an integrated part of the fabric of Mexico.

To combat the situation, the Mexican government engaged in its own internal war against the illegal drug trade. The battles between the drug cartels and the Mexican government created a serious internal conflict in the country, killing thousands of innocent bystanders in the cross fire. Mexican cities near the US border have experienced increased incidences of major drug-related murders and gang violence. Higher volumes of firearms trafficking from the United States and abroad into Mexico have been fueling the armed conflicts. Military and police casualties increased, and the number of drug-related shootings rose.

Cartels have been known to use jet airliners, eighteen-wheelers, and even submarines in their attempts to ship illegal drugs into the United States. Large tunnels have been found beneath the US-Mexican border that were used to smuggle drugs. Intimidation and corruption have been standard practices used by drug traffickers to protect their interests. Bribes, payoffs, and corruption have been difficult to battle in a country with a high percentage of the population living in poor conditions.

 

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