Maquiladoras Mint Plethora of Labor Disputes

Increasingly, US firms trying to outrun real estate costs and strict environmental regulations are moving south of the border. The exodus and its implications lie at the heart of Washington's battle over free trade.

IN industrial plants that hug the border here, Mexicans in blue smocks assemble computer chips, glue seals on refrigerator doors, and mill oak cabinets that were once made in the United States. To many, the plants represent a buoyant vision of the future, an emerging North American economy in which Mexico becomes a production platform for US companies, sowing benefits on both sides of the border.

To others, however, the plants portend pain and pink slips for the American worker - an exodus of US companies south of the Rio Grande.

For the past quarter-century, US firms have been setting up assembly and manufacturing facilities, called maquiladoras, in Mexican border towns. Now the plants lie at the center of the intense debate in Washington over the North American Free Trade Agreement.

Under the pact, the number of US-owned companies operating south of the border is expected to jump; firms are lured not only by the traditional benefit of cheap labor but also access to the Mexican market. But even if the pact doesn't go through, many analysts believe the US presence in Mexico will continue to increase as companies seek cheaper places to produce widgets.

"The free-trade agreement would accelerate the process," says Jorge Carrillo, who has studied maquiladoras at the College of the Northern Border here. "But it will grow with or without the pact."

In the past two years the number of maquiladoras has risen from about 1,500 to 2,000, employing a half million people. Last year they earned Mexico $3.5 billion in foreign exchange, second only to oil.

The US companies operating here, under laws that allow them to import components duty-free, assemble them, and ship the products back to the US, read like a who's who of the Fortune 500: Ford, General Dynamics, AT&T.

There are also plenty of smaller firms, and a growing contingent of Japanese companies (Sanyo, Hitachi, Sony), that assemble TV sets, vacuum cleaners, and medical equipment, stitch shirts, and mold hulls for boats. Companies that service the maquilas are following.

"The trend is that suppliers are now moving into Mexico," says Jodie Williamson, managing editor of Twin Plant News, a trade publication.

Other firms are beginning to arrive that require more than menial labor. Cummins Engine Company, the big Indiana diesel maker, plans to put $24 million into a sophisticated plant to produce crankshafts.

Mexican officials welcome this investment because it will create skilled jobs and refutes the image of Mexico as a backward country with nothing but cheap labor. But unions and other groups in the US fear such moves presage a new genre of corporate defection.

A wage rate that averages $1.40 an hour in the maquilas remains a prime reason for the corporate convoy southward.

But the potential opening of the Mexican market to more US goods and what companies view as onerous regulations in the US can also play a part. In recent years, several dozen furniture manufacturers have left southern California for Mexico and other parts of the Southwest partly because of the region's air-quality rules, the nation's most stringent.

In 1989, Eric Morgan Inc., which employed 300 people making home entertainment centers in the Los Angeles area, moved lock, stock, and table saw to Tijuana. Company brass say environmental rules, high real estate, and other costs stifled expansion.

"We could not even get another [air-quality] permit for a spray booth," says Richard Sinkin, managing director of InterAmerican Holdings Company, a San Diego-based firm that helps set up and manage maquiladoras.

InterAmerican was part owner of Eric Morgan at the time of the move. The Eric Morgan line of furniture has since been sold to Bush Industries, a US manufacturer. InterAmerican still helps manage the firm here.

Bush Industries employs about 200 Mexicans in a cavernous plant in one of Tijuana's poorest neighborhoods. They turn out wood cabinets for TVs and stereos. Many jobs involve simple assembly, but workers also operate table saws, routers, and pneumatic sanders. Salaries start at about $1 an hour.

The plant is well-lighted, with a subsidized lunch counter. The paint booths are filtered and fan-ventilated through the ceiling, equipment InterAmerican officials say is state-of-the-art.

Next door, a Los Angeles textile maker, Countess York of California Inc., is about to begin operation. By mid-summer, 150 Mexicans will be sewing pillow shams, dust ruffles, and drapes. Countess York will not idle workers in Los Angeles, though, since the plant here is an expansion.

Dr. Sinkin defends these kinds of corporate moves. In his office in San Diego, he argues many labor-intensive industries have two options: either go out of business or move operations "offshore" to low-wage countries in Asia.

By setting up in Mexico, all the raw materials for the products - the oak, glue, nails, and hinges - that go into making cabinets come from the US. The theory is that industries that produce these goods will grow, offsetting some of the job losses caused by manufacturers moving south.

In addition, the US parent companies that set up operations in Mexico will be more competitive. Other jobs are created in the US, Sinkin and others maintain, as accountants, distributers, and other firms set up along the border to service the companies.

"For the guy who was going to lose his job in Los Angeles, all this is very little consolation," Sinkin says. "But that person was going to lose his job anyway. I don't think creating more sewing jobs in the US is the answer to our competitiveness."

Union leaders and other critics wince at this. They see only unemployed workers in Detroit and Los Angeles, and firms operating south of the border that pollute and exploit Mexican workers. The answer to competitiveness, they say, is to invest in machines and manpower at home.

"We benefit by investing in new plant and equipment and better training and education of workers," says Joseph Francis, head of a regional labor council in San Diego. "When you abandon this, you lose."

All these arguments mean little to Angelica Munoz. She moved to Tijuana from Acapulco to make more money. She does earn more now - $50 a week, about twice the minimum wage in Mexico - fastening rollers on cabinets at the furniture factory here. She works 9.5 hours a day, five days a week, with a half hour off for lunch. "I like the job," she says. "But I would like to make more money."

Antonio Ortez, who sands nearby, also makes more now than he did as a farmer in interior Mexico. "It is a little tight," says the cowboy-hatted worker, who lives with his family of seven in a makeshift house he built. "But I like the maquiladoras. There is work available."

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