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How low can you go?

Multinationals spread ruin with their search for cheap labour.

Only two years ago, there was plenty of work in Mexico's maquiladoras, the factories for export products. There were even 'help wanted' signs everywhere. But the golden days look gone for good. The lively industrial areas have become 'industrial graveyards'. That is how Saul Landau, maker of the film Maquila, expresses the loss of at least 250,000 jobs in two years' time. Most of these jobs went to an unlikely competitor: China. The reason for relocation? In China, wages are even lower than in Mexico, there are even fewer independent trade unions being founded, and the environmental guidelines are even more flexible.

For decades Mexico has been a cheap production centre for American companies. The trend was given an extra push in the mid-1990s with the signing of the free-trade agreement between Mexico, the United States and Canada. Thanks to NAFTA, American companies were allowed to ship their raw materials to Mexico, and then import the finished products - without having to pay any taxes.

The results were most visible along the Mexican border where factories producing such products as electronic equipment, automobiles, clothing and plastic toys proliferated. But the increase in employment was not accompanied by an increase in wealth, claims Landau in The Progressive (September, 2002). On the contrary, the average workers' daily wages of US$5 to $8 is barely enough to get by on. Factory workers live in slums, cheek to jowl, without sufficient water and electricity, while these services are being provided for the American companies - and with government subsidies at that.

Now that China has created an even more attractive investment climate for foreigners, the factories are on the move again. Wages are around $2 a day, and in China human rights are a luxury, so disruptive campaigns against poor working conditions are unlikely. According to the Washington Post (June 20, 2002), the management of some 500 factories - among them Philips, Sony and Sanyo - concluded that it pays to move from Mexico to China, in spite of the higher shipping costs and the inconvenience of the longer distance.

Mexico is not the only victim. The rest of Asia is markedly suffering from China's growing presence in the global economy. Countries such as Taiwan, Malaysia and the Philippines offer the same technological know-how as China, but have higher wages. Outside of Asia countries such as Brazil, South Africa and Poland are also engaged in a fierce battle with China to win foreign investors' favour. Most likely, they too will end up watching helplessly as electronics giants and car manufacturers move their plants east.

The trend is likely to continue for quite a while, predicts The American Prospect (February, 2003), as millions of Chinese are lining up for factory work. Added to these may be the hundreds of millions of farmers being driven from their land by the advance of the Western agro industry. The magazine cynically recalls the old promises made to developing countries: opening their doors to free trade would lead to higher wages, stimulate investment, improve working conditions and help their economies develop. It seems not.

With unemployment in Mexican cities spreading, government officials and factory owners are doing all they can to give the impression that Mexico is still able to compete. 'That's the free market for you,' mocks Landau. 'Which country will sacrifice its people for the lowest wages? Which country will offer polluting industries the fewest environmental rules? The lowest taxes, the poorest health and working conditions control, the least chance of trade unions? That is what global competition is really all about.'