NewsMax.com
Tuesday, Sept. 9, 2003

An increasing number of "maquiladoras," which are permitted to import components duty free as long as they are assembled solely for exporting, are downsizing or closing in Mexico, the New York Times reports. Five hundred of the country’s 3,700 maquiladoras have shut down since 2001, claiming 218,000 jobs, according to the Mexican government.

The peril facing companies such as Gicsa, a Mexican company that produces a third fewer jeans than it did two years ago and has seen its work force has shrunk by 30 percent, has spurred deep soul-searching in Mexico, which faces intensifying competition a decade after the North American Free Trade Agreement provided Mexicans once held by Americans.

Even though NAFTA has given Mexican businesses advantages, China has evolved as a major exporter to the United States. In the first half of 2003, Mexico had $67 billion worth of exports to the United States, just barely more than China’s figure. Last year, China's exports to the United States grew 20 percent, while Mexico's volume remained flat.

China is even expected to surpass this country as the No. 2 exporter to the United States. Canada is still No. 1.

Though Mexico still leads the way in supplying big-ticket products such as cars, auto parts, large-screen TVs and appliances to the United States, China has displaced Mexico in many important industries. China, for example, exports more lamps, certain computer and electrical components, footwear, plastics, toys and sporting goods than Mexico.

Chinese-made clothing, toys and figurines of Mexico's patron saint, the Virgin of Guadalupe, are even flooding Mexico.

"Mexico has nearly lost the battle on low-skilled, labor-intensive industries, where it simply cannot compete with China on labor costs and will likely continue losing market share," according to a recent report by Merrill Lynch.

President Vicente Fox's government is the scapegoat of many Mexican business executives who believe the administration has failed to respond as China vigorously pursued foreign investment.

China’s labor rates are one-fourth of Mexico’s. To compete, business executives say, Fox’s government needs to reduce taxes, provide cheaper electricity, improve roads and curb corruption.

Business executives and citizens in Mexico direct some of their ire at China as well. Headlines such as "China: The Enemy to Vanquish," and "The Chinese Threat" adorn the pages of Mexican newspapers.

Fernando Canales, the country’s economy minister, sparked a minor diplomatic dispute after recently telling reporters that China had "no respect for human rights" and was "not a country with solid political and economic institutions."

China is doing nothing but embracing globalization, officials there say.

"It is natural that there is concern," said Shi Wei, spokesman for the Chinese Embassy. "But there should not be so much exaggeration of the economic threats from China."

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