Views from South of the Border
By Peter Cozzens '79
As the effects of economic globalization spread across the country, the perception that foreign countries, especially Mexico, are benefiting from lost American jobs is steadily growing. While it is true that many American jobs have moved to Mexico, including the lost Maytag jobs in Galesburg, are Mexico and its citizens truly benefiting from economic globalization?
In an effort to answer this question, Knox Magazine contacted Peter Cozzens '79, who is the deputy principal officer at the U.S. Consulate General in Monterrey, Mexico—the business center of Mexico and the third largest city in the nation. Reflecting the importance of Monterrey and northeastern Mexico to U.S. interests, the Consulate General Monterrey is the fifth largest U.S. diplomatic or consular mission in Latin America, with a staff of more than 50 American and nearly 100 Mexican personnel.
Cozzens sat down with Consulate General Monterrey's consul for political and economic affairs, Daniel B. Johnson, and asked a few questions that are on the minds of many Americans. Below is a short recap of their conversation.
Peter Cozzens: Where does Monterrey figure into the Mexican economy and in the globalization movement?
Dan Johnson: Northeastern Mexico, where Monterrey is located, is home to some of the largest and most dynamic businesses in Mexico, including companies that produce cement, glass, steel, automotive parts and tile. With less than six percent of the nation's population, the northeastern states of Nuevo Leon and Coahuila account for over 10 percent of the country's gross domestic product. Not only do these companies export to the United States, they also invest in the U.S., opening plants and hiring American workers. IMSA, a large producer of steel and pre-manufactured building components, reports that almost 3,000, or 23 percent, of its nearly 13,000 employees are in the U.S., with operations from California to Tennessee.
PC: What does globalization mean in Mexico? Do Mexicans define it in different terms than Americans?
DJ: I think globalization means many of the same things to Mexico as it does to the United States. Mexico has access to extremely large markets for its products through its free trade agreements (FTAs). It has FTAs with more countries than any other nation and is the only country besides Israel to have FTAs with both the European Union and the United States. This gives Mexico great room for expansion. In spite of these agreements, over 90 percent of Mexican exports still flow to the United States. Like the U.S., Mexico runs a trade deficit with China, and much of Mexico's traditionally labor-intensive, low-value-added production is moving to other countries. According to the Mexican Information and Geography Institute (INEGI), Mexico lost 200 production lines to China, 80 to the rest of Asia, 40 to Eastern Europe, and 75 to the U.S. between 2001 and 2003. In short, Mexico is being forced into a global economy and has to deal with the same competitive pressures as the U.S.
PC: What fears does globalization generate among Mexican business and political leaders? Is there a fear that some Mexican jobs will go abroad, much as certain sectors of American jobs have?
DJ: The fear that some Mexican jobs will go abroad is not a fear but a reality. Low labor costs are no longer enough to keep businesses in Mexico. Other expenses, such as energy, taxes and benefits, tip the scale in favor of Asia or the United States, which many Mexican business people say have a better regulatory framework. Politicians in Mexico are acutely sensitive to the issue because of its direct impact on unemployment. In Northern Mexico, government leaders are launching aggressive programs to attract more technical industries where they believe they have the advantage over Asia. The federal government is trying to push through energy, fiscal, judicial and labor reform in order to create an environment that is more conducive to business.
PC: How have globalization and the provisions of the North American Free Trade Agreement (NAFTA) complemented one another—or clashed—in the case of Mexico?
DJ: NAFTA has facilitated the movement of goods and services within North America. The three economies—Mexico, Canada and the United States—have become economically interdependent in a system where the economies of Mexico and Canada are highly correlated to the ebbs and flows of the United States.
PC: Many people in the United States believe that Mexico's economy is growing at the expense of American jobs. Is that assumption valid?
DJ: The evidence tends to be very anecdotal. It is true that some factories have moved operations oversees or to Mexico, but globalization has also resulted in the establishment of industry in the U.S. because of easy access to supplies manufactured in Mexico. Mexican companies are also opening operations in the U.S., thus creating jobs for Americans.
PC: How will Monterrey and the northern Mexico industrial sector fare in the coming decade?
DJ: Northern Mexico has taken the initial steps to transform the region into a high-tech hub. The states of Nuevo Leon, Coahuila, Tamaulipas and Chihuahua signed an agreement to work with Texas on security and infrastructure integration projects. Nuevo Leon is currently launching an aggressive recruiting campaign in an attempt to draw high-tech, biotech and aerospace industries to Monterrey. They have coupled this push with the Tecnologico de Monterrey, Mexico's largest private university and the premiere technological university in Latin America, in an attempt to utilize the research and development capabilities of the university. This is just one example of how Mexico is trying to fend off competition and reinvent itself as a force in new-economy industries.
Peter Cozzens is the deputy principal officer at U.S. Consulate General Monterrey. A 1979 summa cum laude graduate of Knox College and recipient of an Alumni Achievement Award, he also is the nationally acclaimed author of 14 books on the American Civil War and the Indian Wars of the United States.
Daniel B. Johnson is the consul for political and economic affairs at U.S. Consulate General Monterrey. He is a graduate of Eastern Illinois University and holds an M.A. in biology from Eastern as well. Prior to entering the Foreign Service, Johnson managed a financial services company in Illinois.