Trade and the Environment: The case of Mexico's Maquiladora
Background
A Maquiladora, or Maquila, is a Mexican corporation that participates in foreign investment opportunities. These corporations, generally, are free from taxes and tariffs allowing for the temporary importation of machinery, materials, parts, and other items needed to run a business such as computers. They can be located nearly anywhere with only a few limitations while adhering to Mexico’s labor laws stated in their constitution. Although primarily associated with Mexican industry, Maquila’s can exist around the world.
The Maquila program, first sanctioned by the Mexican Secretariat of Commerce and Industrial Development in 1964, arose due to the collapse of the Bracero Program, which lead to increasing rates of unemployment. A Maquila’s product is sold via either other Maquiladora’s or through exporters.
The US has become a main user of Maquiladora’s because of the attractive nature of cheap labor and the near limitless prospects of manufacturing products. With the birth of the 1994 North American Free Trade Agreement (NAFTA), Maquilas flourished becoming the main form of international trade between Mexico and the United States.
Economic
In terms of overall cost of labor, Mexico is considered to be lower than that of China. Additionally, Mexico has a history of experience with manufacturing, and is therefore a more attractive candidate for the outsourcing of labor than some other low-wage countries. Mexico also has the advantage of close proximity to North America, making transport of materials cheaper and more efficient. Finally, countries in North America see Mexico as a particularly good location for manufacturing because of their involvement in NAFTA. As a result, the costs of imports are much lower than to other countries, and the customs processes are expedited.
Additionally, the location of these manufacturing hubs along the Mexico-U.S. border has boosted economic activity in America itself. For example, between 1995 and 2002 about 500,000 new jobs were created in this region. During this time period, the regional job growth rate also grew beyond that of the entire United States.
Sierra Club has performed several studies on the economic impacts of the maquiladoras' pollution, and has concluded that there are at least $36 billion worth of damage each year alone. According to the club, these environmental impacts have far exceeded the economic gains in Mexico. These impacts are a prime example of externalities so far as they have not been considered when evaluating the overall economic efficiency of the programs.
Regulations
The regulations that permit Maquiladoras can ultimately be linked to the Bracero Program, which lasted from 1951 to 1964. This program provided Mexican citizens with temporary visas to the United States to take part in agricultural harvests. These employment opportunities drew tens of thousands of Mexican citizens towards the Mexican-U.S. border. However, due to high application numbers, there were not enough spaces for all applicants to be accepted. As a result, unemployment and population rates jumped in the areas near the border.
In 1964, the Bracero program was eliminated in the United States, generating border unemployment rates between 40 and 50 percent. The Mexican government determined that there would need to be an international connection to address the unemployment and population issues. Mexico looked outwardly to foreign companies as potential sources of revenue and employment. Up until this point, these corporations had avoided Mexico due to high import taxes and foreign ownership problems.
However, these problems were addressed in 1965 by the Border Industrialization Program. Foreign-owned companies no longer had to pay taxes to import materials or equipment into Mexico. The main requirement was that all produced goods would be exported from the companies, thereby creating a source of revenue for the country. However, in the late 1980’s, Mexico revised this rule, allowing companies more freedom. Finally, in the mid 90’s, Mexico established agreements with Brazil, Paraguay, Argentina, and Uruguay allowing Mexican export to enter the countries without taxation. However, the United States exports to these countries are still taxed, making it desirable for American corporations to export directly from Mexico. The final changes in regulation came in 2000 with the North American Free Trade Agreement (NAFTA) among Mexico, the United States, and Canada. This agreement allowed raw materials and equipment to enter Mexico free of tax only from participating countries.
Social Costs
The most common Maquiladora workers are immigrants from central Mexico and women who have little factory experience. There are over 400,000 women working in the Maquiladoras industry. The make up close to 60% of the work force. Despite the legal hiring age of 16, it is common for younger girls to get false documentation to allow them to work at only age 12, 13, or 14.
Mexicans that work in the Maquiladoras must endure a terrible working environment that includes inadequate training, exposure to many potentially hazardous materials, and inadequate information and protective equipment. Additionally, employees of a Maquiladora make minimum wage, which is between $3 and $4 per hour per day in Mexico.
Essentially, Maquiladora employees are being subjected to unsafe working conditions, including labor accidents, exposure to hazardous materials/toxic materials. In fact, labor laws rarely followed. The labor laws include the following:
1.Sustainable wages to maintain a family and provide for children
2.A maximum 8 hour work shift, 48 hrs per week. Voluntary overtime pay.
3.A free day w/pay after 6 working days.
4.It is illegal to hire children.
5.Pregnancy paid leave of absence for 12 weeks, then I hour everyday for breast-feeding.
6.Security protection and training – employees are allowed to stop working if a risky, unhealthy, inappropriate or unethical task is assigned.
7.Workers compensation is paid when labor-related accidents and/or sickness occurs.
8.Workers have the right to have a collective contract, form union coalitions, and the right to go on strike.
9.Workers have job security – full time – full benefits.
Additionally, environmental health is not taken into account. This has negative ramifications for the environment and those living in the area. The presence of the Maquiladoras combined with 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 (See Environmental Impact section). Worker illnesses are caused by their working conditions.
Since the typical Maquiladora worker is a woman in her prime reproductive years - between the ages of 16 and 28 - her constant exposure to toxic pollutants risks her own health and that of her children (born and unborn). Despite the fact that women’s health are being put at risk due to chemical exposure from the workplace, the women are blamed and punished for poor health and the companies which expose the women to toxic chemicals go free from blame. These same women also endure discriminatory hiring practices, sexual harassment and illegal firings – women do not have rights. Outside of the workplace, Maquiladora workers and their families are subjected to poor living conditions. Slum communities often surround the Maquiladoras. These living situations contribute to health problems, violence, and lack of education for children.
Environmental Considerations
The maquiladora industry contributes directly and indirectly to environmental degradation along the border between Mexico and US. Indirectly it attracts tens of thousands of migrants to the region, creating an overload on the urban infrastructure and its fragile ecology. Directly the assembly plants generated tons of hazardous and toxic wastes and dumped them illegally.
Case Studies
Tijuana
The rise of maquiladora program in 1965 brought in serious sewage pollution that impacted the Pacific Coast and Tijuana River Estuary. As industries migrated to Tijuana area in 1960s for the low-cost labor, a huge influx of people seeking work was also generated in the area. Consequently both industrial and human waste exceeded the capacity of the regional sewage treatment system. The problem was further exacerbated as population grew and more maquiladora industries came in the following decades. The number of maquiladoras increased from 140 in 1983 to 529 in 1995. As a result, approximately 13 million gallons of raw sewage spills into the Pacific Ocean and flows up to San Diego County beaches. The beaches were closed almost the entire summer of 1993. The pollution affects the Tijuana River too. The sewage and pollution flows from Tijuana City down the river into the Ocean at Imperial Beach. Since Tijuana and San Diego are located in the same atmospheric basin and runoff from the Tijuana River flows northward, the production of pollutants in each city affects the other.
In addition, the health risks are also severe as anyone stepping into the Tijuana River Estuary is in the risk of getting salmonella, shigella, fibrial, cholera, hepatitis A, and malaria. The city of Tijuana also has poor sanitation services. Some neighborhood such as Loma Taurina has health hazards created by untreated sewage. During severe storms untreated sewage spills into the streets. Even people living around Tijuana are exposed to dangerous levels of toxins. In the hospitals in San Diego County, cases of tuberculosis have increased. Women on both sides of the border are giving birth to children who are deformed.
In 1985 according to Annex I of the Border Environmental Agreements between Mexico and US, Mexico responded to the problem by deciding to build a treatment facility in La Joya and the US decided to build a pipeline system and a treatment facility on the US side to support the La Joya facility in the event of a breakdown. The Mexican plant was completed in October 1991 and the South Bay International Wastewater Treatment Plant, San Diego was finished in 1997. However, the treatment plants will not be able to stop sewage from overflowing into the Tijuana River Estuary when there is an excessive discharge of sewage or when the river rises.
References
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General Accounting Office, (2003). Mexico’s maquiladora decline affects u.s.- mexico border communities and trade; recovery depends in part on mexico’s actions Retrieved from http://www.gao.gov/new.items/d03891.pdf
Leveille, E. (2010, November 10). Mexico representation. Retrieved from http://www.mexicorepresentation.com/?cat=13
Maquiladora. (2010). [Web]. Retrieved from http://www.latimes.com/media/photo/2010-10/56777425.jpg
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Ted Pauw.(1995). Tijuana River Water Pollution into the US. TED Case Studies, Vol 4,No.2. Retrieved from http://http://www1.american.edu/TED/tijuana.htm
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