Washington Post | By Mary Jordan | Dec. 3, 2003
SANTA ANA CHIAUTEMPAN, Mexico -- The "China threat," as people around this textile town call it, struck here last week, costing 80 jobs in a factory that makes blankets.
"Maybe next time, I'll be the one who gets fired; China is going to make Mexico go broke," said Bernarda Parada, 27, as she hemmed blankets that sell for $10, while similar ones made in China sell here for $6.
Turn on any radio show, attend any business conference or talk to workers in small towns like this one and the buzzword is China, particularly how its rising fortunes are causing pain in Mexico. Since 2001, industry officials said that more than 200,000 clothing, textile and other factory jobs have disappeared in Mexico and hundreds of factories have relocated to China, where labor is typically four times cheaper.
A popular reaction is to disparage goods made in China and to call for higher trade barriers to protect Mexican goods. Many are even invoking a new slang expression, to be "China-ed," word play on a common vulgarism in Spanish. With Chinese-made Mexican flags and Chinese-sewn traditional Mexican serapes now filling street markets, some people say dejectedly that the only Mexican commodity left that China does not make -- at least not yet -- is tequila.
The U.S. textile and clothing industries and U.S. government regulators are also upset; late last month, the United States imposed import quotas on several types of Chinese clothing and textiles. But the China challenge in Mexico is more profound because the Mexican economy depends so heavily on low-skilled, relatively cheap manufacturing. That edge is now being chiseled away by a country of 1.2 billion people half a world away. So, now, officials are scrambling to reposition the nation's workforce toward higher-skill jobs and higher-end manufacturing.
"Many people see China as a big threat, and obviously it is," said Alejandro Dieck Assad, an economist and top official in Mexico's Finance Ministry. "But China is also simultaneously a big opportunity." He said competition from China could be just the push Mexico needs to accelerate its transition from low-skilled assembly work to more lucrative manufacturing jobs -- less sewing of garments and more fabrication of electric circuits. Dieck said Mexico could also benefit by seeking opportunities in the growing Chinese consumer market and by attracting Chinese tourists to Mexican beaches.
"There are more and more Chinese tourists going abroad; imagine the opportunities," Dieck said. "Maybe they would like to go to Cancun, Puerto Vallarta and the pyramids of Mexico City. We have to exploit this tremendous opportunity."
Mexico's president, Vicente Fox, is scheduled to host Premier Wen Jiabao of China for a visit beginning Dec. 12, after Wen visits the United States. The two leaders are expected to discuss the growing flow of cheap Chinese goods to Mexico, a staggering $6.3 billion worth last year. Mexican officials stress that Mexican imports to China increased by 62 percent to $456 million last year, fueled in part by China's growing taste for Corona beer. But that still leaves a $5.8 billion trade deficit and officials are concerned about China's expanding exports.
Beyond these numbers are large quantities of Chinese goods smuggled into Mexico, officials said. Mexico imposes significant tariffs on certain Chinese imports -- some as high as 500 percent -- but those levies are often not paid. Customs officials said the typical route for Chinese contraband is for goods such as pajamas, pants, bras and tennis shoes to be smuggled into California ports by ship, then driven over the U.S.-Mexico border in trucks. Mexican officials said the goods are sometimes repackaged to make them appear to be from Pakistan or another countries whose goods are subject to lower tariffs or none at all to enter Mexico. And sometimes, officials said, a customs agent is paid to look the other way.
The volume of Chinese contraband is huge; private industry estimates say 50 percent of clothes and shoes sold in Mexico are made in China. In response, Dieck said the government recently began an advertising campaign called "Focus on Mexico" to urge people to buy legal products and avoid contraband. Much of it is sold in street markets that also pay no sales taxes.
Fox has pledged the "full force of the law" to punish those who smuggle Chinese goods. The Mexican attorney general recently announced seizures of hundreds of tons of Chinese garments and textiles, including 60 truckloads in a single raid. The Mexican Congress is now debating tougher penalties for those who sell Chinese contraband, with many arguing that the trade should be penalized as organized crime.
"It's horrible!" said Carmen Temoltzin Cruz, who has been selling shawls, ponchos and other clothing in this central Mexican town for 29 years. She pounded her fist on her glass display case filled with bright shawls that sell for $7, saying Chinese imitations are now selling for $4. "Things are bad. Business must be down 50 percent," she said.
Even here in the state of Tlaxcala, which for centuries has been a national clothing center, Chinese-made fabrics are being sold on the streets. Temoltzin said she was boycotting Chinese goods, and she hoped other Mexicans would, too. "We need to buy Mexican things, because if not, our money will go to another country."
Many Mexicans also feel the impact of China's growing hold on the U.S. consumer market.
In a landmark shift, the United States this year imported more goods from China than from Mexico. In the first nine months of 2003, the United States bought $109 billion in goods from China and $102 billion worth from Mexico. Canada is still the top supplier of imported goods to the United States, but China has moved up to second and dropped Mexico to third place. This shift comes on the 10th anniversary of the North American Free Trade Agreement (NAFTA), which was designed to give Mexico and Canada enormous trade advantages with the United States.
Blanket factories such as the one where Parada works, which sell soft Wal-Mart blankets adorned with Winnie the Pooh, Nemo and other Disney characters, are finding U.S. demand slowing in the face of competition from cheaper products made in China.
"China won't take long to finish off what is left of us," said Oscar Lopez, who used to work in a textile factory but now sells chocolate bars on the street. "It's bad in every sense."
Most of the 60,000 people in this typical Mexican town of narrow streets and a central plaza adorned with a tiled gazebo are still involved in the textile industry, making, selling or transporting tons of blankets, ponchos, and shawls. "But each day it gets harder," said Rafael Torre Mendoza, whose family blanket factory, Providencia Textile Group, is the biggest in town. "Everybody here has been affected one way or another" by China, said Torre, citing declining income and rising joblessness.
But there is still hope that Mexican manufacturers can respond to the challenges and reposition themselves, much as Detroit did when faced with competition from Japanese automobile imports in the 1980s. "We will have to produce new products with new techniques to stay one step ahead of the Chinese; that's our weapon," Torre said. "We have to make better designs and higher-quality products."Washington Post:
