The Mexican textile industry has asked the economy ministry, which handles trade issues, to investigate whether China is dumping textiles and clothes in Mexico. Raúl García, the director of the Cámara Nacional de la Industria del Vestido, said that the government had already promised that its ambassador to the WTO would raise the issue.
García claims that 60% of the clothes sold in Mexico are produced in China. He claims that Mexico's textile industry is being undermined by China in three ways. The first is through China's policy of providing export subsidies. The second is through the Chinese government's manipulation of the exchange rate; Mexican textile makers claim that the Chinese government is deliberately keeping the renminbi undervalued. The third allegation is that a lot of the Chinese textile industry is state-owned and thus does not have to make a profit.
GAO warns over maquiladoras
The US General Accounting Office (GAO), produced a huge report on the state of maquiladora industry at the end of July. The GAO took an interest because maquiladoras, besides being the biggest element in US-Mexican trade, are mostly US-owned. Not only do maquiladoras export to the US but they also import the bulk of their inputs from the US. So the slowdown in the industry has had a knock-on effect in the US. The GAO said that it undertook the research into the industry to assess the effect of the slowdown on US industry and on border communities.
The GAO concluded that there were several reasons for the maquiladora industry's slowdown. These ranged from the deceleration in the US economy to increased competition from other places (notably, China, Central America and the Caribbean), and the strengthening of the peso against the dollar. The GAO noted that the industry had lost market share in 47 of the 152 main US import categories (defined as categories in which US imports exceeded US$100m a year) which involve maquiladoras: in 35 of these 47 categories China had increased its market share. The GAO also noted that the industry had been affected by changes in the way Mexico taxes maquiladoras and the loss of some tariff benefits because of Nafta. In particular, the changes under Article 303 of Nafta, which removed the refund of import duties from non-North American sources of imputs for the industry, had a major effect. The change meant the Asian-owned maquiladoras, which sourced inputs from Asia, were at a disadvantage. Although the Nafta treaty gave the maquiladoras seven years to find North American suppliers, few did. Only 2% of maquiladoras' non-labour and non-energy inputs come from Mexico. The removal of the tax breaks made Asian-owned maquiladoras less competitive and prompted some to close.
The GAO's conclusion was that Mexico would need to take action to restore maquiladoras' competitive advantages. It also warned that the US homeland security policies posed an additional challenge to the industry.
Around 40% of the US's US$114bn in exports to Mexico in 2001 involved goods for the maquiladora industry: over half (54%) of Mexico's US$140bn in exports to the US involve maquiladora products. The slowdown in the US has hit the industry hard: it has lost 200,000 jobs since May 2000.
The automotive and computer parts of the maquiladora industry are among the most confident about the viability of maquiladoras. The computer industry claims that the wave of new investments around Ciudad Juárez is due to the industry's integration with the US supply chain where time to market is of the essence. Automotive maquiladoras are pinning their hopes on the full opening up of the automotive market in 2004.
Maquiladora promoters are pushing the Mexican government to reform the energy and water and sewage industries. The maquiladoras say that the cost of water and electricity in Mexico is much higher than it is in China. Maquiladora companies also want the government to introduce a labour reform that will make it easier to hire and fire. Some maquiladora operators claim that the current slowdown has actually been a good thing because the slacker labour market has meant that it is now worth their while to invest in training staff. Previously, maquiladoras did not bother because staff turnover was so high. Better-trained staff should mean that productivity will rise.
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