The revamped North American Free Trade Agreement could be upended by the midterm elections, as Democrats who will soon control the House threaten to withhold their support to extract greater protections for American workers.
Following the North American Free Trade Agreement (NAFTA), the growth of maquila plants skyrocketed.
A maquiladora is a Mexican assembly plant that imports materials and equipment on a duty-free and tariff-free basis.
- Maquiladoras receive raw materials from companies in the U.S. to assemble and export back as finished products.
- Maquiladoras have not only become an increasingly significant component of the Mexican economy, they are also an important part of U.S. corporate strategy in achieving competitively priced goods in the world marketplace
- NAFTA was created to eliminate barriers to trade and investment between the US, Canada and Mexico.
- The implementation of NAFTA immediately eliminated tariffs on more than one-half of Mexico’s exports to the US and more than one-third of US. exports to Mexico.
- Most maquiladoras in Mexico produce electronic equipment, clothing, plastics, furniture, appliances and auto parts, with clothing being the top product. While these factories have lost some clothing work to cheaper locations in Asia, recent pay raises in Chinese factories have made the Maquiladora Program more attractive to foreign companies.
- Maquiladoras rank second only to oil in Mexico’s industrial sector.
The revamped North American Free Trade Agreement by President Trump in September 2018 is now being challenged by Democrats for political reasons
- Administration officials remain confident they will corral the votes for the new United States-Mexico-Canada Agreement.
- While White House officials considered pushing the revised deal through the coming lame-duck session, they did not want to risk a backlash from lawmakers in both parties.
- Democrats, emboldened by their midterm win and eager to outshine Mr. Trump as defenders of the American worker, are unlikely to sign off on any deal that does not include significant changes that labor leaders and newly elected progressives are demanding.
That could involve reopening negotiations with Mexico, although American and Mexican negotiators have both publicly ruled out that possibility. The House will consider the agreement first under the Constitution’s provision mandating that revenue bills originate in the lower chamber. A vote could take up to nine months or longer, according to senior administration officials.
House Democrats are particularly concerned about a provision that would require at least 30 percent of the labor used to build each car in Mexico to be completed by workers earning at least $16 an hour. That amount will rise to 40 percent by 2023 but the $16 wage is not indexed to inflation, meaning the increase will be diluted over time as prices rise.
The text of the agreement also requires Mexico to make it easier for workers to join unions. All of these actions were intended to make it less likely that automakers and other manufacturers would shift American jobs south for cheaper labor. But Democrats and their allies in manufacturing unions — who have remained neutral on the proposed pact — maintain that the new requirements, while an improvement on the original Nafta, do not go far enough.
They are demanding more specifics about how the deal will be enforced and raising questions about whether the $16-an-hour benchmark for Mexican workers — which is about four times the typical wage for Mexican autoworkers — is high enough to staunch the flow of American jobs to Mexico.
“Without enforcement, you don’t have anything. Without it, you are, shall we say, just rebranding Nafta,” Representative Nancy Pelosi, Democrat of California, said last week, days before voters swept her party back into power. “Right now, it is a work in progress,” said Mrs. Pelosi, a former speaker who is expected to reclaim that post. “Mexico has to pass a law about labor rights in Mexico, so that has not happened yet and that is a predicate of this agreement. Most important of all are the enforcement provisions in terms of labor and the environment.”
The Nafta vote will be up or down, and Congress cannot amend the text, according to the rules governing fast-track trade agreements. But negotiators from each country are free to negotiate potential changes to secure enough votes for passage in their respective chambers.
Mexican officials have said the labor standards in the deal are sufficient.
In Mexico, a maquiladora (Spanish pronunciation: [makilaˈðoɾa]) or maquila is a sub-contractor, manufacturing operation, where factories import certain material and equipment on a duty-free and tariff-free basis for assembly, processing, or manufacturing and then export the assembled, processed or manufactured products, sometimes back to the raw materials’ country of origin. They are an example of special economic zones as seen in many countries.
Following the 1994 North American Free Trade Agreement (NAFTA), the growth of maquila plants skyrocketed. During the five years before NAFTA, the maquila employment had grown at a rate of 47%; this figure increased to 86% in the next five years. The number of factories also increased dramatically. In the five years preceding NAFTA, 564 new plants opened; in the five years following, 1460 plants opened. However, the maquiladora growth is largely attributable to growth in US demand and devaluation of the peso, not NAFTA itself.
- In the 1970s, most maquiladoras were located around the Mexico–United States border.
- By 1994, these were spread in the interior parts of the country, although the majority of the plants were still near the border.
- Today, Recent research indicates that the maquiladora industry affects U.S. border city employment in service sectors.
Maquiladoras are foreign-owned, controlled or subcontracted manufacturing plants that process or assemble imported components for export. They operate under a special customs regime which allows the maquiladora to temporarily import into Mexico on a duty-free basis, machinery, equipment, materials, parts, and components. These items can be used for the assembly or manufacture of finished goods for subsequent export as well as administrative equipment such as computers, and communications devices, subject only to post a bond guaranteeing that such goods will not remain in Mexico permanently.
Mike Stuart, 1stonline.us