The Washington PostDemocracy Dies in Darkness

History shows moving manufacturing to North America isn’t a cure-all

The initial promise of Mexican factories in the 1960s gave way to impoverished communities and capital flight in search of higher profits

A Foxconn factory in San Jeronimo, Chihuahua state, Mexico, as seen from Santa Teresa, N.M., in August. Companies are building new factories near the U.S.-Mexico border after supply-chain issues the past several years, but it's not a cure-all. (Paul Ratje/Bloomberg)
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Consumers may soon see the label “Made in China” replaced by a tag that reads “Made in Mexico.” The New York Times has reported on an increase in companies relocating their manufacturing operations from major industrial centers in Asia to industrial parks in Mexico. This drastic restructuring of the supply chain is causing many observers to wonder how the dynamics of the global marketplace will shift in the coming years, with the hope that an increase in manufacturing in North America will invigorate that sector of the U.S. economy.

The impetus for the move? Supply-chain issues that arose during the covid pandemic. Many Americans turned to online shopping. Peloton bikes, KitchenAid mixers and sofas were all sought-after items for people spending more time at home. But many orders were delayed because of shipping problems or stocking and supply issues. Images of dozens of container ships waiting to dock outside the Port of Los Angeles frustrated consumers and manufacturers alike. Locating factories in Mexico may reduce potential transportation complications. Trucks and trains traveling overland between Mexico and the United States pose fewer logistical concerns than ships crossing the Pacific Ocean.

And while such a move may be logistically beneficial to consumers, American workers might benefit as well. By some estimates, Mexican factories source 40 percent of their components from American manufacturers. This migration of Chinese capital suggests a new era for consumers, firms and workers across North America.

But the movement of factories to Mexico is not a new phenomenon. The promise of renewed manufacturing in the United States and more investment in Mexican communities recalls the false promises of an earlier era of globalization. By looking at the history of maquiladoras (factories) we can glean important insights and lessons on how export-oriented factories in Mexico can change supply chains — but also reinforce the exploitation of workers. In particular, binational plans to use maquiladoras to strengthen the economy and improve living standards for Mexican and Mexican American workers in the borderlands and for U.S. factory workers in the country’s industrial Midwest fell short of meeting those lofty goals.

Beginning in 1965, Mexico began a program to renew and modernize the cities along its northern frontier. Known as the Programa Nacional Fronterizo, or PRONAF, this drive involved the creation of new parks and roadways, border crossing points and, most importantly, factories. These cities were magnets for migrants from Mexico’s southern states and had long been in danger of losing citizens to U.S. cities just north of the border. PRONAF promoted the building of pleasant-looking cities and more amenities, coupled with a stronger and more diverse economic base.

At the heart of PRONAF was a manufacturing program founded upon a key trade arrangement with the United States. The Border Industrialization Program (BIP) allowed American companies to set up factories in Mexico close to the U.S. border. U.S. companies were incentivized by loopholes in the language of U.S. treaties and tariffs. These exceptions allowed companies to export key components for consumer goods to Mexican factories to be assembled into a final product that was then shipped back to the United States without a tariff penalty. U.S. companies could keep the most “technical” aspect of the production processes in the United States while offshoring the low-wage but more labor-intensive work of assembly. Because Mexican workers could be paid far less than their counterparts in the United States, this arrangement boosted U.S. companies’ profits.

For both U.S. companies and Mexican public officials, the BIP was a success. Throughout the 1960s, Mexican officials trumpeted how both location and the quality of workers made cities like Juárez and Nogales superior to comparable sites in Taiwan. Companies cut costs and Mexico’s border cities saw the average wage of their workers surpass that commanded by workers in the interior of the country. In fact, it was so effective that borderlands leaders on the U.S. side began to implement their own ideas about how to replicate its successes in U.S. border cities like El Paso and Laredo.

During the second half of the 1960s, the United States and Mexico further collaborated to build a set of regional economic plans to decrease poverty and improve the standard of living in the linked metropolitan areas that straddled the border. Dubbed the Commission for Border Development and Friendship (CODAF), its American wing was headed by former El Paso mayor and ambassador to Costa Rica Raymond Telles. Part of the goal was to reduce labor migration from Mexico to the United States, as the bracero guest worker program ended. A related component of this plan was a Great Society drive to make sure that Mexican Americans living in border cities in the United States had access to jobs, training and programs that allowed them to overcome the obstacles posed by decades of discrimination.

CODAF and Telles aimed to raise the standard of living for Mexican Americans in Texas, Arizona, New Mexico and Southern California. The hope was that U.S. maquiladoras would provide job opportunities for Mexican American engineers and managers. Telles coupled his industrial plans with other wide-ranging initiatives tied to education, housing, public health and recreation. It was an expansive vision.

But the arrangement faltered.

Labor unions in the United States objected to the continuance and an expansion of the BIP for obvious reasons. American industrial workers argued that investing in existing factories and workers in the Rust Belt would be cheaper than relocating factories to Mexican border corridors. With many U.S. politicians eager to court the White “silent majority” in America’s hollowed-out industrial cities, Telles’s plan to address Mexican American poverty by relocating manufacturing jobs to the borderlands became politically untenable.

But U.S. companies flocked to Mexico anyway — without the social supports envisioned by CODAF. Mexican maquiladoras increasingly employed women in substandard conditions and with low wages, while U.S. companies created lightly staffed marketing offices in U.S. border cities that did little to improve the career opportunities for Mexican Americans. The pre-NAFTA maquiladora boom of the 1970s and 1980s ultimately provided few benefits to Mexican or U.S. cities. Poverty rates in many U.S. cities remained the same or increased. And Mexican border cities struggled to provide basic infrastructure and services to the many Mexican migrants making their way north in search of opportunity.

As a result, Mexican labor unions began to challenge U.S., Japanese and other multinational companies to provide better wages and living conditions in border cities where maquiladora workers were forced to live in ramshackle colonias without running water or sewers. Many U.S. and other multinational companies responded to worker-led pressures by moving their facilities to the Pacific Rim. The Mexican cities that had depended economically on maquiladoras found themselves in a precarious situation, with expanding populations attracted by the lure of new jobs and a shrinking industrial base.

This history of foreign factories in Mexico offers a lesson. It shows how capital, in search of cheap, malleable labor, reshaped space. For many multinational corporations, vast distances, like that from the Rust Belt to the borderlands, or from the U.S.-Mexico border to the Pacific Rim, could be surmounted with political, legal and financial legerdemain. Investment in manufacturing in Mexico provided a false promise of improved economic circumstances for many people.

Even though today’s movement of capital to Mexico promises cheaper products for consumers and more job opportunities for workers across North America, we must remember that companies are always on the lookout for cheaper locations and more labor controls. The quest for profit motivates capital to move from place to place, which will impoverish workers and communities across the globe unless they act collectively across borders to turn back the tide.