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 or textiles. They can be located nearly anywhere along the US-Mexican border. However, Maquiladora's adhere to only the few limitations of Mexico’s labor laws stated in their constitution.Although primarily associated with Mexican industry, Maquila’s can exist around the world.
Economically, Maquiladora's have created numerous job opportunities that draw families from all over Mexico to the border areas. However, this has lead to several social costs as the standard of living and wages have decreased. Approximately only 2/3 of the average "household's" basic needs can be supplied creating a surrounding slum communities.
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.The close proximity greatly lowers the transportation costs. 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.
Although there has been an increase in employment, there has also been a major environmental impact directly associated with Maquiladora's. Between the pollution from the sub-standard living conditions and industrial pollution/dumping of hazardous waste, many of the employees are directly exposed and suffer from health issues. Since Mexico's regulations are not too concerned for environmental health, not a lot is being done to "clean up the situation."
The environmental, social, and economic ramifications are evident wherever a Maquiladora arises. Such case studies such as that of Tijuana give insight into what costs are really associated with this practice.
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 (BIP). 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. Only the actual labor was taxed in Mexico; importing and exporting remained duty-free. The major motivation for the creation of the BIP was twofold. First was the hope of solving the unemployment rates along the border, and second was the potential to attract foreign industries to Mexico as a source of revenue. Essentially, they were hoping to provide a low-cost labor alternative to areas such as China. In pursuit of this goal, however, environmental regulation and enforcement of labor laws were ultimately neglected.
Interest in Mexico’s Maquiladoras, however, was slow to build. In 1982, the value of the peso dropped significantly, drawing significant attention from foreign investors. Additionally, in the mid 1980’s, Mexico relaxed the regulations on the companies, allowing an increase in the amount of the entire production process that was allowed in Mexico. This attracted additional companies to establish maquiladoras within Mexico’s borders. The sector continued to grow through the early nineties, with almost 1,900 individual maquiladoras by 1993.
The final, and most recognized piece of legislation effecting maquiladoras, was the North American Free trade Agreement (NAFTA), which was signed into law in 1994. Essentially, the goal of NAFTA was to eliminate any barriers existing among Canada, America, and Mexico in the hopes of increasing trade. NAFTA had several notable effects on the maquiladora sector. Firstly, it allowed gradual increases in the total amounts of maquliadora products that were allowed to be sold domestically. Secondly, it eventually removed the amount of taxes paid by the United States on the Mexican labor. Furthermore, along with NAFTA, the North American Agreement on Environmental Cooperation was passed into law, which created the Commission for Environmental Cooperation (CEC). The overall aim of CEC was to enforce any existing environmental regulations in North America.
Economic
One of the economic advantages of maquiladoras is the cheap cost of labor in Mexico, as compared to other nations. In terms of overall cost of labor, Mexico is considered to even 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.
The disparity between the environmental regulations in the United States and Mexico is also an economic draw. The environmental action taken by individual plants in Mexico has been considerably low, particularly compared to those in North America. A survey was conducted by the Commission for Environmental Cooperation, which showed that nearly half of those asked did not have any level of environmental policy in place at the plant, as shown by the Table titled "Survey of Mexican Plants for Environmental Policies".
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.
Social Costs
Even in the maquiladora industry, where Mexico had a theoretical competitive advantage, wages are almost 40 percent lower than those paid in non-maquiladora manufacturing. Trade liberalization has reduced living standards for the Mexican poor. Today the minimum wage in Mexico buys only one third of what it was able to buy in 1982 (Global Exchange, 2007). 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 much lower than that of the U.S.
As maquiladoras boomed and NAFTA came into play, large migrations of Mexican workers transpired as job seekers headed to the border in search of work. For example, Tijuana’s population increased more than sevenfold from 1960 to 2000. However, maquiladora employees are paid poverty wages: the income earned by two adults employed full-time in the maquiladoras cover only about two thirds of the basic needs of a family of four (Simpson, 2007). The maquiladoras, which are owned by transnational corporations, draw workers to their factories yet do not invest in the neighborhoods where these workers and their families live. Moreover, NAFTA does not requiring such investment and Mexico lacks resources to provide urban infrastructure for these neighborhoods that develop around the maquiladoras. Therefore, these slum communities lie next to hazardous-waste facilities and polluted waterways (Simpson, 2007).
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. NAFTA did create jobs in Mexico and did increase trade between Mexico and the U.S. However, NAFTA failed to reduce inequality at the border. Today, there is greater income disparity at the U.S.-Mexico border than at any other major commercial border in the world. The minimum wage in Tijuana today buys one fifth what it did in the early 1980s. Millions of Mexico’s citizens cannot meet their basic needs and live in extreme poverty (Simpson, 2007). In Tijuana, 67% of homes have dirt floors, 66% of homes do not have piped water, and 52% of streets are unpaved. NAFTA was a unique trade agreement because it was the first one that included labor and environmental side agreements, but neither are enforceable or have brought adequate protections for workers or the environment (Simpson, 2007).
Since 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 some of the most polluted in Mexico (See Environmental Impact section) (Bolterstein, 2000). The rivers around maquiladoras are polluted with industrial and biological waste. Lining the rivers today are slum settlement where full-time maquiladora workers making products for the U.S. consumer market live in dwellings made of scraps of wood and plastic, without piped water, sewage service, garbage collection, or electricity (Simpson, 2007). Worker illnesses are caused by their working conditions.
In Tijuana, there are no worker unions for any maquiladora work force. This leads to inequitable treatment of maquiladora workers. Essentially, Maquiladora employees are being subjected to unsafe working conditions, including labor accidents, exposure to hazardous materials/toxic materials. In fact, labor laws are rarely followed. The supposed condemned practice of requesting negative pregnancy tests is required for employment in most maquiladoras. Labor organizers are harassed, blacklisted and fired. Workers are exposed to toxics and face unsafe working conditions daily. Sixty percent of electronics workers in Mexico’s maquiladoras, for instance, report insufficient or no safety training on handling chemicals. In fact, most of the maquiladoras are using and producing toxic waste daily – including electronics, wood, plastics and metal industries. Studies have shown that toxics at these sites can cause grave harm to human health (Simpson, 2007).
The most common Maquiladora workers are immigrants from central Mexico and women who have little factory experience. Women make up close to 60% of the maquiladora 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 younger ages (Bolterstein, 2000). 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). Major health problems include neural tube defects (NTDs), spina bifita, and anencephaly (Bolterstein, 2000). 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.
The Zapatista movement initiated an uprising to oppose NAFTA and the economic policies it enforces. Today, the evidence is indisputable that the NAFTA model of trade exploits workers and the environment and perpetuates poverty and racism. NAFTA-style trade agreements must be replaced with a model that puts people before profits and works to reduce inequality and eliminate racism (Simpson, 2007).
Environmental Impacts
The presence of the maquiladoras combined with loosely enforced Mexican environmental laws and a lack of suitable waste storage and treatment facilities, causes the border area to be among the most polluted in Mexico. As a result the maquiladora industry contributes significantly to water pollution along the border between Mexico and US in two major ways. First of all since it attracts tens of thousands of migrants to the region, huge amount of human waste is generated, creating an overload on the urban infrastructure and its fragile ecology.Both US and Mexican government have taken actions to address the issue. On an annual basis, in the 1997-2000 period, Mexico destined on average US$ 34 million to water development, regulation, enforcement and state transfers in the Mexican border region. The United States assigned an annual US$ 50 to 100 million to water treatment facilities on both sides of the border. One example is the water treatment plants in Cd. Juárez, that, with a US$ 11 million grant from the United States. EPA has increased the water treatment in the city, from zero to 90 percent.
Other than human waste, the assembly plants generated tons of hazardous and toxic wastes and dumped them illegally, poisoning wildlife and communities all along rivers. in 1996, the estimated quantity of hazardous waste generated by the manufacturing subsector of “Metallic products, machinery and equipment” was 152,286 tons, or approximately 15 percent of the Mexican industry’s total generation that year. In relative spatial terms, CESPEDES reported that approximately 33,765 tons of hazardous waste is generated in the Mexico-US border region, annually (defined as the area within 100 km from the US border), compared with 5,114,507 tons for the area comprising the central Mexican states. Furthermore,Air pollution is a great concern along the border. Border residents are exposed daily to extremely high air-pollutant levels including high levels of carbon monoxide,particulates.
Case Study: 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 due to poor sanitation services, Some neighborhood in Tijuana City such as Loma Taurina has health hazards created by untreated sewage. During severe storms untreated sewage spills into the streets. Moreover, the threat from industrious waste is also present to many neighbourhoods. For example,Metales y Derivados , a lead-smelting facility in Tijuana, was shut down in 1994 when its owners failed to comply with toxic waste disposal laws. However, the waste was never properly treated and/or relocated and is currently leaking through its containers, seeping into the ground, and contaminating communities water supply.So people living around are exposed to dangerous levels of toxins. The health risks are also severe in the Tijuana River Estuary. People stepping into the area have high risk of getting salmonella, shigella, fibrial, cholera, hepatitis A, and malaria.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.
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