Maquiladoras and The Wall

By: Kade Peterson

 

In 1966 a new program was released known as the maquiladora program.  The Mexican government was responsible for establishing this program which allowed duty-free importation of raw-materials and other goods. (White) The way it works is an American business would build a factory just south of the border of The United States and Mexico and hire workers from Mexico to do the labor and work at the factory. While being beneficial to both countries, these are a few reasons why it is beneficial to The United States:

• Allowed businesses to increase profit margins by hiring workers at a price much lower than minimum wage.
• Eliminated extreme shipping costs from other countries such as China, Pakistan, India, Etc.
• Materials, goods, assembly components, and production equipment are allowed to enter Mexico duty-free.
• Products can be imported into the U.S. at lower tariffs than any other country because the factories are located on the border.

Not only that, but it is also beneficial to Mexico for the following reasons:

• Industrialize northern Mexico.
• Provide jobs for over a million Mexican citizens. (Stephanie Navarro)
• Creating jobs along the border which will slow down immigration
• Helps the economy

Progression of the maquiladora and NAFTA

Since the beginning of maquiladoras until now, this program has not  slowed down. More and more factories are being built providing more jobs, and new opportunities. In 1985, maquiladoras overtook tourism as the largest source of foreign exchange, and since 1996 they have been the second largest industry in Mexico behind the petroleum industry(Louie Yoon 69). In 1994, this program began to truly flourish when the North American Free Trade Agreement (NAFTA) was approved. NAFTA is the world’s largest free trade agreement and consists of 2,000 pages, with eight sections, and 22 chapters discussing certain agreements in regard to trade between Canada, Mexico, and the United States. A few examples of what this agreement states are the following:

• Enforces equality between the three countries and “grants the most-favored-nation status to all co-signers” (Kimberly Amadeo).
• Completely eliminates tariffs on imports and exports.
• Requires exporters to get certificates of Origin to waive tariffs.
• Forces countries to respect all patents, copyrights, and trademarks.
• Allows easy access for business travelers to each country (Amadeo).

NAFTA increases investment opportunities and allows growth in the economy from all three countries. Between the three countries its growth domestic product is over 20 trillion dollars.

Cons of the Maquiladoras

            Despite the fact that maquiladoras provide jobs for over a million people, there can be many negative effects. Many workers suffer from working too much and still not making enough to provide for themselves/families. As well, in certain areas, many workers suffer from abuse, sexual harassment, illness, improper training, etc. As good as it may seem to business owners, maquiladoras can be very detrimental and harmful to people when not run correctly. Another negative side effect is due to “loosely enforced Mexican environmental laws and a lack of suitable waste storage and treatment facilities, cause the border area to be among the most polluted in Mexico” (Elyse Bolterstein). It’s super important that businesses can be aware of these affects so changes can be made.

Trump and the “New” NAFTA

While many are in disagreement, Donald Trump stated that NAFTA was “the worst trade deal that America has ever signed.” Revisions were made in September of 2018. With only a few minor revisions and the main core of the deal remaining in place, NAFTA is now known as USMCA, which stands for United States-Mexico-Canada Agreement. The changes aren’t substantial and will not be enforced until 2020. This is so important because Mexico is the United States second largest export market and the United States is Mexico’s first.

The Wall

With Trump’s plans to build a wall across the Mexican border, a huge concern is brought up with how that would affect the economy of each nation. One thing that is concerning is the future of maquiladoras. How would businesses be able to access and transport goods effectively when there is a huge wall that stands between the two countries and officials and funds are taken from regulating border crossings to defend the wall and its aims? How would they make it work in a timely manner and cost-effectively? Maquiladoras have huge impact on the Mexican economy just as much as the American. “The effect of a trade war with Mexico would cascade beyond lost jobs in the U.S. plants. Downtown stores would lose business, lay off workers and close up shop. Mexican investors would likely sell off their U.S. properties, leading to plummeting real estate values” (Tracy). The relationship that the United States has with Mexico is very important to our thriving and growing economy. “The economic livelihood of these communities is on the line if the relationship with Mexico is not managed in a cooperative way,” said Chris Wilson, deputy director of the Mexico Institute at the Woodrow Wilson International Center for Scholars. “Their commerce with Mexico is their lifeblood. Anything putting those trade relationships at risk puts their communities at risk.” (Tracy). Another huge problem would be the cities close to the border that depend on visitors from Mexico. They are dependent upon serving them and if a wall was built that indirectly slows border crossings, tons of businesses will have to file for bankruptcy because there won’t be enough customers.

Outcome

            Because the program of maquiladoras has thrived for the past 60 years, its roots are firmly planted, and many people completely rely on it. If the wall is built separating the two countries, changes will need to be made and fewer options will be available. Millions of lives will be impacted in regard to those involved in the maquiladora program. Business owners could find new manufacturers in different countries and deal with the tariffs. They could find new employees or build new factories which would cost them a lot of money. However, in the end, it is inevitable that many people will lose jobs and many businesses will fail due to the wall on the Mexican border of the United States.

 

Works Cited

Amadeo, Kimberly. “6 Things NAFTA Does.” The Balance, www.thebalance.com/nafta-definition-north-american-free-trade-agreement-3306147.

Bolterstein, Elyse. “Environmental Justice Case Study:” Environmental Justice Case Study: Maquiladoras, umich.edu/~snre492/Jones/maquiladora.htm.

Jan, Tracy. “How Trump’s Immigration and Trade Policies Could Hurt Border Town Economies.” The Washington Post, WP Company, 26 Jan. 2017, http://www.washingtonpost.com/news/wonk/wp/2017/01/26/how-trumps-immigration-and-trade-policies-could-hurt-border-town-economies/?noredirect=on&utm_term=.3e3ae8e69d89.

Louie, Miriam Ching Yoon. Sweatshop Warriors: Immigrant Women Workers Take on the Global Factory. South End Press, 2001.

Navarro, Stephanie. “Inside Mexico’s Maquiladoras: Manufacturing Health Disparities.” Studylib.net, studylib.net/doc/8202540/inside-mexico-s-maquiladoras–manufacturing-health-dispar.

“What Is a Maquiladora in Mexico?” Manufacturing in Mexico, manufacturinginmexico.org/maquiladora-in-mexico/.

White, Mike. “NAFTA and the Maquiladora Program.” Team NAFTA, Team NAFTA, 18 Apr. 2016, teamnafta.com/manufacturing-resources-pages/2016/4/18/nafta-and-the-maquiladora-program.