US Trade Unions Unhappy With Mexican Plants
UNITED STATES labor unions are angry at Uncle Sam for what they perceive as ``an open back door'' for Japanese companies to manufacture goods cheaply in Mexico and ship them to the US. The unions are upset by the huge growth of Japanese investment in maquiladoras, assembly plants that are set up across the border in Mexico. These plants, which use inexpensive labor, receive special trade benefits from the US.
``Maquiladora is another word for greed,'' says Don Turner assistant to the president of the Chicago Federation of Labor.
Mr. Turner cites an action by Paloma Ltd., Japan's largest manufacturer of hot-water heaters, as an example of how the Mexican investments are taking jobs away from Americans.
Last year the company bought the US-based Rheem Manufacturing Company. Paloma then announced a decision to move Rheem's assembly plant from the south side of Chicago to Nuevo Laredo, Mexico, by 1990. In an attempt to prevent the move, Rheem's 600 workers had made wage and other concessions.
``The people took pay freezes, gave back vacation time, and just like that they called us in and said they were leaving,'' says Joseph Bernstein, secretary treasurer of the Teamsters Local 781 in Chicago.
Rheem officials had no comment.
Under a 1965 US law, US manufacturers using plants in underdeveloped countries pay duty only on the value added to their products in those countries.
Jack Otero, international vice president and political director of the Transportation-Communications International Union, says that US labor cannot compete. ``The import law is pitting the Mexican worker against the American worker.''
This is not the way it was supposed to be.
Maquiladoras began as twin-plant operations in which companies in the United States would send their partly assembled products to be finished just over the border in Mexico.
Like magic, US companies received the assembled product in their plants on the US side of the border, paying only a 55- to 80-cent average hourly labor cost to finish the product. Twin plants were intended to provide jobs on both sides of the border.
``It was envisioned that plants would be set up right across the river from each other. That idea didn't last long,'' says Don Nibbe, publisher of Twin Plant News, a monthly trade magazine.
In Mexico, the plants are moving into the center of the country. On the US side, instead of plants, companies have warehouses that offer little US employment.
``Senator Bentsen has frequently told Mexican officials that we need more than a billboard on our side of the border,'' says a press secretary for Sen. Lloyd Bentsen (D) of Texas.
Now the Japanese, taking US companies as the example, are setting up maquiladora plants in Mexico. Although the majority of the 1,500 companies are US owned, Mr. Otero, who is also a vice chairman of the Democratic National Party, believes that the Japanese companies are quickly following the example of their US counterparts.
``They've learned that the market profits are huge, considering that the average wage in Mexico is $4 a day,'' says Otero. ``Then they sell the product in the US for dollars.''
Currently, 45 of the 1,500 maquiladora plants are Japanese. Most of those 45 are subsidiaries of US subsidiaries of Japanese companies. More are coming: An additional 35 to 40 Japanese projects are scheduled to be completed within the next two years.
In a letter, Senator Bentsen has asked Treasury Secretary Nicholas Brady to push Mexico to allow more than 20 percent of maquiladora production - the current limit - to be sold in Mexico. Bentsen also urged Mr. Brady to propose a joint US-Mexico effort to develop new markets for maquiladora products in Europe and Japan.
Ralph Biedermann, president of the MRB Group, an international consulting firm that acts as a liaison between the companies and foreign governments, says these plants are too small to pose a threat. ``In 1988, the 1,500 maquiladora plants produced $9.8 billion worth of goods. This seems large, but compared to the US it's still small.''
Maquiladoras, which in 1965 numbered 57 plants and employed 4,257 workers, have been growing at a rate of 17 percent annually and are expected to double in the next 10 years. The maquiladora industry, which employs more than 400,000 Mexican workers, is considered Mexico's second-largest source of foreign exchange after petroleum.
According to an AFL-CIO report, maquiladoras are expected to employ between 600,000 and 800,000 workers by the turn of the century. Mark Anderson, an international economist with the AFL-CIO, points out that only about 10 percent of the 1,500 maquiladora plants are union shops.