With NAFTA Mexico’s border factories brace for uncertain future
EL PASO: If you sleep on a memory foam mattress, chances are good that its fabric cover was made here in a small factory in this desert border town on the western-most edge of Texas.
Well, here and over there, across the Rio Grande in Ciudad Juarez, a Mexican city where pieces of fabric cut in El Paso are stitched together and shipped back across the border. The supply of cheap labour in Mexico has fuelled the rise of manufacturing plants dotting the border known as maquiladoras.
The journey of this mattress cover, from El Paso to Ciudad Juarez and back, illustrates the far-reaching tentacles of free trade and its impact on the border economy and across the United States. It’s a journey now fraught with tension as President Trump moves to re-negotiate - or even unilaterally withdraw the country from - the 23-yearold North American Free Trade Agreement ( NAFTA) that has allowed maquiladoras to flourish but that Trump and some Rust Belt communities blame for the loss of US manufacturing jobs.
Perhaps no one knows the complex implications of trade agreements better than a family whose prosperity and company profits were built on their promises. MFI International is a US textiles manufacturing firm that has operated on the border for three decades. Now, in a moment of uncertainty and flux, the tweaking of any trade deal will change the foundation on which the company runs as well as the economic fates of two cities that are inextricably linked.
“We are in the desert where things don’t look that green, but what makes our area very fertile is our people on both sides of the border who work in the manufacturing industry,” said Cecilia Levine, who, along with her husband and son, owns MFI International. “Every job in Mexico produces jobs in the United States.”
Altering NAFTA could raise another complexity - the higher prices likely to follow would make US companies less competitive against manufacturers overseas.
“Stopping NAFTA doesn’t stop the flow of goods coming in from China,” Levine said.
NAFTA, which Trump has called “the worst trade deal in history,” set the foundation for the current economic eco-system in border towns by allowing companies in the United States to send raw materials to their plants in Mexico for assembly and import the finished product back to the United States - generally without paying duties.
The result for consumers: Finished goods at a lower price.
On a recent morning in an industrial park on the eastern outskirts of town, rolls of bound cloth waited to be inspected and processed by the 100 or so workers in MFI’s El Paso plant. A worker used a knife to manually cut patterns from a three-inch stack of polyester material as cumbia music echoed through the factory.
Once the pieces for the mattress cover are cut, they are loaded onto semi-trucks bound for Ciudad Juarez, where workers earning less than half the salary of their US counterparts sew the pieces together.
Cecilia Levine used to cross the US-Mexico border four to six times each day.
She started manufacturing plus- size fashion in Ciudad Juarez with a six-person plant in 1986, seeking to take advantage of a previous customs rule that allowed US materials to enter Mexico duty free as long as the manufactured products were exported back to the United States. Within a couple years, her factory had grown to 260 workers.
Then a single mum, she recalled her daily routine of piling her three young children in the car and driving from their El Paso home over the bridge
It’s a journey now fraught with tension as President Trump moves to re-negotiate - or even unilaterally withdraw the country from - the 23-year-old North American Free Trade Agreement (NAFTA).
to Ciudad Juarez to open the factory by 6.30 each morning before schlepping them back to El Paso in time for school. Her American children grew up in the factories, doing their homework, learning to sew and driving forklifts.
Shortly thereafter, she met Lance Levine, who had just moved his vacuum cleaner filter factories from New York and Illinois to El Paso and Ciudad Juarez to better compete with the Asian market. He was expanding manufacturing to include other goods such as jock straps and baby carriers. She snagged a contract away from him to make slippers, and they fell in love. She sold her company and joined his, as the chief of operations.
Business boomed after NAFTA came into force in 1994. In addition to lowering tariffs among the United States, Canada and Mexico, the trade agreement created a common set of rules, regulations and practices among the countries. That made companies feel more comfortable about the long-term stability of the US-Mexico relationship, prompting them to invest in manufacturing operations along the border, Lance Levine said.
Maquiladora employment in Mexico grew 86 per cent in the first five years after the onset of NAFTA, according to the Federal Reserve Bank of Dallas. MFI expanded the number of workers in both its El Paso and Ciudad Juarez plants.
Then China joined the World Trade Organisation in 2001, opening up the world economy for Chinese exports. Nearly all textiles manufacturing migrated to China, where production costs were much smaller in comparison.
“We got killed. The entire textile industry in the US was almost destroyed. We just couldn’t compete with Chinese prices,” said Lance Levine, accusing China of currency manipulation and government subsidies that he said prevented fair competition.
At the time, Lance Levine sat on an International Trade Advisory Committee to the US Commerce Department. Cecilia Levine served on President George W. Bush’s Export Council. Together they raised concerns to the US government about American businesses losing their competitive edge to China. Cecilia even travelled to China with then- Commerce Secretary Donald Evans to meet with the Chinese government about levelling the playing field - to no avail.
“It was like a nightmare. All our baby products went away. Clothing went away. Home furnishings went away,” Cecilia Levine said. “If I’d only known how to make jeans and those jeans went away, I could have sat there and cried. I learned to make something else.”
MFI switched to manufacturing larger products, such as mattress and couch covers, that would cost more to transport from China to the United States.
The Levines’ concerns over unfair foreign competition is reflected in Trump’s trade rhetoric. Trump has already withdrawn the United States from the Trans-Pacific Partnership, a 12-nation trade agreement designed during the Obama administration to help the countries compete against China’s growing economic clout. But Trump argued that the deal would have put US workers at a disadvantage to cheaper labor in countries that were also part of the deal, such as Vietnam. Instead, Trump has threatened to impose high tariffs on Chinese, as well as Mexican, goods.
Economists say NAFTA has benefited the United States overall and that raising tariffs would risk sparking a trade war and wreak havoc on the manufacturing supply chain. Slapping a 35 per cent import tariff, as Trump has threatened with Mexico, would be “bad for growth, bad for business, bad for jobs,” said Caroline Freund, senior fellow with the Peterson Institute for International Economics in Washington.
Freund chalks up Trump’s talk of high tariffs and withdrawal from NAFTA as negotiating ploys. — WP-Bloomberg