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by Jim Holman.
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Why the Perilous Journey?

Free Trade and Illegal Immigration

BY CHRISTOPHER ZEHNDER

"It's sad," said Louise Zwick to me. We were discussing the then current and continuing debate over illegal immigration from Latin America to the United States. In particular, we talked about how trade policies, such as NAFTA, and policies of the World Bank and the International Monetary Fund have helped to create the conditions that make immigration, legal or not, increasingly the only alternative for many workers and their families.

I called Louise Zwick because, for many years, she and her husband, Mark Zwick, have been working with immigrants, documented and undocumented, at their Casa Juan Diego Catholic Worker house in Houston, Texas. Low wages in Latin American countries, she said, have increased the flow of immigration to the United States until it has reached the great torrent we see today. NAFTA and the proposed Central America Free Trade Agreement, she said, will only make matters worse.

"For a long time -- maybe about five or ten years ago -- people were pouring in from Honduras" to Casa Juan Diego, said Louise. "They told Mark they made $14 a week, five or ten years ago in a maquiladora [a factory working under a free trade agreement]. At that time they were paying $14 an hour in Detroit." And where did the wage savings go, asked Louise? "It went to CEOs and stockholders. The people were saying to us, 'we were making $14 a week, and on that we could either eat or pay rent, but not both.' One told us that his father who had a better job, more seniority in another place, got $28 a week, and he could live on that. So the father would not feel pushed to emigrate.

"If the factories would pay just a little bit more, the people could stay home, where they want to be in the first place," said Louise Zwick.

I asked Zwick where I could find more information on the effects of first world trade policies on immigration. She referred me to articles published between 1995 and 2005 in Casa Juan Diego's newspaper, the Houston Catholic Worker. (One can access the articles at www.cjd.org/paper.html.) The articles detail a history of "first world," particularly United States, meddling in the economies of Latin America (with the sufferance of Latin American governments) in the name of economic development. The development, however, the articles claim, has been carried out for the good of a few and has resulted in the impoverishment of many. Other articles and studies, I found, support these claims and leave one questioning whether the answer to illegal immigration is not economic justice rather than strict enforcement of immigration laws, guest worker programs, and the erection of border fences.

United States and European involvement with the economies and politics of Latin America is nothing new. But the more recent history of U.S., European, and Asian involvement in Latin American countries began in the years following World War II. Since, after the war, U.S. commercial banks had surplus wealth, they loaned money to developing countries to enable them to buy American-made goods. These loans continued even when it was apparent that governments, riddled with corruption, were misusing the funds.

Loans to the developing world increased in the 1970s, when OPEC members, benefiting from large profits in oil sales, deposited their "petrodollars" in northern banks. Since these loans were made to governments and leaders who squandered the money, this aid" just heaped up more debt. Faced with rising interest rates and a global recession in the early 1980s, several debtor countries, beginning with Mexico in 1982, were either facing default or found that their accumulated debt service equaled their annual foreign aid income. This did not spell disaster only for third world governments, but financial ruin for first world banks.

This is where the World Bank and the International Monetary Fund stepped in. To save the first world banks, these bodies offered to loan debtor countries the money they needed to service their loans if, in return, they would adjust their economies according to policies instituted by the International Monetary Fund. Basically, countries have had to cut their budget deficits and increase exports through "stabilization" and "structural adjustment" programs, which are tailored to fit each country. To comply with IMF directives, debtor countries have had to privatize state-controlled industries, devalue their currency, remove price controls, decrease government spending (on education and health care, for instance), and move toward an export economy.

While this may all sound benign, it is not. To encourage exports, "structural adjustment" programs have benefited industries owned either by wealthy natives or by first world corporations. Profits made by the latter do not enrich the debtor country but go to owners and stockholders in the United States and other first world countries. Money formally spent on social programs goes to financing the debt, thus relocating large amounts of capital outside the country. In the name of "flexibilizing" labor, managers have been allowed to crack down on unions and given greater discretion over employees' hours. The result is that earnings among lower-income groups have become seriously depressed. At the same time, prices of basic goods have risen, rendering many poor families incapable of obtaining such essentials as potable drinking water, food, and decent shelter. Because governments under a structural adjustment plan have to favor large businesses for their export potential, they remove protections for competing small business. Many small proprietors cannot compete and are forced to join the ranks of the underpaid workers -- or emigrate to the United States.

And despite all these sacrifices, countries submitting to International Monetary Fund programs by the late '90s only saw their debt burden decrease. Nor has there been any real economic development of these countries, but greater poverty, environmental degradation (through deforestation and strip mining), and an ever-increasing emigration north.

The case of Mexico illustrates this. In a 1997 Centre for Research on Latin America and the Caribbean paper ("Structural Adjustment in Mexico and the Dog that Didn't Bark"), York University professor Judith Adler Hellman said that in 1982, faced with an $80 billion debt to foreign creditors, Mexico sought assistance from the International Monetary Fund. The structural adjustment program the IMF placed on Mexico, in return for a $4 billion loan, was directed at inefficiencies in the Mexican economy and government, but it cut too indiscriminately. The program called for, in Hellman's words, "the streamlining of the bloated state sector which had long served as a make-work refuge for the unemployed and underemployed." But though it eliminated make-work public jobs, the program also cut, said Hellman, "hundreds of thousands of serious jobs," so reducing real wages that, "for example, among school teachers the 'triple shift' became the standard work day" -- that is, teachers taught at one school in the morning, another for a second shift, and then had a third job at night.

The structural adjustment program also eliminated Mexico's "import substitution program" by which, since the 1940s, Mexican entrepreneurs, working "at low levels of productivity," were "shielded from foreign competition and propped up by an assortment of government subsidies." Under the IMF's program, such buttresses were reduced or entirely removed, which "brought about the collapse and disappearance of the least productive sectors of Mexican industry and, with those firms, the jobs of at least 800,000 workers." Such measures, said Hellman, led to the closing of factories, a decline in oil exports, with the result that by 1986, Mexico's foreign debt had reached over $100 billion. Inflation resulted because of the program's mandated removal of price ceilings on goods, and real wages declined. "By 1986," said Hellman, "almost two-thirds of urban households had incomes below the official minimum wage."

In 1986, Mexico agreed to open its borders to foreign trade by seeking admission to the General Agreement on Tariffs and Trade (GATT). But, since 1965, the Mexican government had permitted maquiladoras or factories, which could be 100 percent foreign owned, for the assembly of imported parts. Importing parts to maquiladoras is duty and tariff-free. Since most of these companies were either partially or wholly owned by U.S. interests, the maquiladora system represented a limited free trade agreement with the United States.

Columnist Bob Herbert, in the July 24, 1995 New York Times (cited in the September-October 1995 Houston Catholic Worker), documented the low wages paid to workers in maquiladoras. According to Herbert, clothing manufacturers such as Banana Republic, The Gap, Eddie Bauer, and others contracted with Latin American plants that pay wages insufficient to cover a worker's food and rent together. For instance, said Herbert, the Korean-owned Orion apparel plant in Honduras hired teenagers (whom they worked on average 17 hours a day when big orders from American companies came in) for about U.S. 38 cents an hour. In El Salvador, said Herbert, the Gap was paying about U.S. 56 cents an hour.

Trade policies have especially hurt Latin American farmers. Elena Reilly, writing about conditions in Guatemala in the May-June 1999 Houston Catholic Worker, said that throughout the 19th century foreigners appropriated native land for coffee production, which made up 96 percent of the country's export earnings by 1889. Land use patterns have reflected this economic colonization, with the few wealthy coming to own the great majority of the land (divided into large land holdings called latifundios) while poor farm families have been left with the smallest, most marginal plots of land, which they are forced to divide among family members, since they cannot afford more land. When land divisions become too small to be tenable, many leave the countryside to work in the cities -- or leave their native land for the United States, where they hope they can earn the money to buy more land back home.

Other factors, according to Reilly, have led to "proletarization" of farm populations. U.S. foreign policy, she wrote, favors what is called "non-traditional agricultural exports" -- that is, it encourages "minifundista" farmers to grow export crops such as snow peas, broccoli, cauliflower, berries, melons, and flowers rather than the traditional crops, such as beans and maize, which would find a local market. [According to Reilly, "the 1986 Bumpers Amendment to the Foreign Assistance Act prohibits the U.S. Agency for International Development (USAID) from supporting staple food production because these crops could compete with U.S. agricultural exports.]

An article in the October 2003 Latin American Research Review, "Non-Traditional Agricultural Exports in Highland Guatemala," noted that the production of such export crops renders small farmers dependent on chemical fertilizers and pesticides, marketing middlemen, and a distant foreign market, while it threatens their future by bringing them into competition with latifundio production of the same crops. Yet, basing itself on a study carried out in the highland Kaqchikel region of Guatemala from 1998 to 2001, the article claims that most of the small Maya farmers who planted at least part of their holdings to non-traditional crops perceived that such crops increased their income and even made it possible for them to acquire additional land from large landholders.

But the effects of the North American Free Trade Agreement, concluded by Mexico and the United States in 1994, show how free trade agreements can ultimately undermine any gains small farmers make. Writing in the November-December 2005 Houston Catholic Worker, Monseñor Álvaro Ramazzini, bishop of San Marcos in Guatemala and president of the Bishops' Secretariat of Central America and Panama, noted that "NAFTA displaced 1.5 million Mexican peasant farmers," many of whom "sought industrial jobs, causing Mexican wages to drop by 20 percent. Communities and families were torn asunder as those who lost their livelihoods undertook the perilous journey to the United States in hopes of finding some way to support their family."

A February 25, 2004 Carnegie Endowment for International Peace report, "Mexican Employment, Productivity and Income a Decade after NAFTA," supports Bishop Ramazzini's claim. After NAFTA, the Mexican government reduced its agricultural tariffs for various trade partners, but especially for the United States. While Mexican exports of fruits and vegetables have increased, according to the report, they have "not kept pace with imports of U.S. grains and oilseeds. This may be due in part to greater efficiency among U.S. producers; but is also partly due to U.S. subsidies. By one estimate, U.S. corn was sold in Mexico from 1999 through 2001 at prices 30 percent or more below the cost of production." The result of the agricultural trade deficit with the United States, which existed prior to NAFTA but "grew after enactment of the trade pact and was larger in 2002 than in any previous year," according to the Carnegie report, has been the loss of employment Bishop Ramazzini noted. "Agricultural employment in Mexico actually increased somewhat in the late 1980s and early 1990s, employing 8.1 million Mexicans at the end of 1993, just before NAFTA came into force," said the report. But then "employment in that sector ... began a downward trend, with 6.9 million employed at the end of 2002, a loss of 1.3 million."

A 2003 presentation by the International Relations Center's Americas Program to the European Parliament further supports Bishop Ramazzini's claims. The potential for devastation of the agricultural sector under NAFTA was greater for Mexico than for the United States since, in 2003, nine years after the implementation of the trade agreement, 21 percent of Mexicans still depended on farming whereas, in the United States, only 2.8 percent of Americans did. According to the International Relations Center's presentation, between 1994 and 2003, imports of corn (a Mexican staple) from the United States to Mexico tripled while the price of corn had dropped 64 percent since 1985. Since NAFTA, imports of soybeans, wheat, poultry, and beef to Mexico rose over 500 percent, "displacing domestic production," said the presentation. And though exports from Mexico of fruits and vegetables rose during the period, they "fail[ed] to compensate for imports," since "agro-export crops cover only 8% of total cultivated land, compared to the three million producers of basic grains and oilseeds on 70% of Mexican farmland that has been devastated by imports." The Mexican government, according to the presentation, could have applied tariffs under NAFTA (at least until 2008), but failed to do so.

Another trade agreement could threaten the viability of small farmers in Guatemala and five other Central American nations. This is CAFTA, the Central American Free Trade Agreement, promoted by the Bush Administration and passed by Congress in 2005 (but still unapproved by all Central American governments). CAFTA, said Bishop Ramazzini, would allow the "dumping of subsidized food exports into our countries," thus threatening the "60 percent of Guatemala's population that lives in small farming communities." Ramazzini said the Bush Administration threatened "to cut off our existing trade preferences [with the United States] so as to force Central American approval" of CAFTA.

And where would the displaced agricultural workers go? To the factories or to the "informal sector," low-paying jobs in the service sector. But, according to the Carnegie report, "NAFTA has produced a disappointingly small net gain in jobs in Mexico. Data limitations preclude an exact tally, but it is clear that jobs created in export manufacturing have barely kept pace with jobs lost in agriculture due to imports. There has also been a decline in domestic manufacturing employment.... About 30 percent of the jobs that were created in the maquiladora plants in the 1990s have since disappeared. Many of these operations were relocated to lower-wage countries, particularly China."

One cause of the low growth in manufacturing jobs in Mexico, said the Carnegie report, is the export "production model," which favors northern manufacturers. Under this model, "component parts are imported, then processed or assembled, then re-exported."Such a model does not encourage the creation of businesses in Mexico itself to provide material or supply parts to manufacturers and thus makes for no new employment. Another cause for low domestic manufacturing employment, said the report, "is that some Mexican manufactures have been displaced directly by imports." Productivity increases in manufacturing in Mexico has also played a part, since an increase in productivity spells a corresponding decrease in employment.

Coupled with the decline in jobs is a decrease in wages. Today, said the Carnegie report, wages "are below their 1980 levels," caused mostly by Mexico's "debt crisis of the early 1980s, when a devaluation of the peso and contractionary policies designed to achieve macroeconomic stability and meet the terms [of an International Monetary Fund structural adjustment program] demanded by international holders of Mexico's debt led to a sharp drop in wages" and the "peso crisis of 1994-1995," in which "the cost of imported goods and the rate of inflation both shot up, while wages were constrained by the [Mexican] government's monetary and wage-setting policies." Wages recovered somewhat after these two events, but not enough. And, under NAFTA, "productivity growth has not translated into wage growth, as it did in earlier periods in Mexico. Mexican wages are also diverging from, rather than converging with, U.S. and Canadian wages."

Agricultural employment in Mexico will probably take another hit in the next couple of years. Both the Carnegie report and an April 1, 2006 Los Angeles Times report said that under the terms of NAFTA, Mexico by 2008 must drop all its tariffs and quotas designed to protect its agricultural sector. According to the Times article, the importing, in particular, of powdered milk from the United States has hit the Mexican milk producers hard, even though many trade protections remain in place. But when these are gone, what will happen to Mexico's milk producers?

Mexican factories, whether in the maquiladora sector or not, will probably not be able to absorb the excess labor from job losses in agriculture. Competition from lower-wage China, in particular, is attracting North American, European, and Asian companies that have done business with Mexican factories. "From 2001 to 2004," said an April 6, 2006 San Francisco Chronicle story, "about 900 maquiladora plants closed in Mexico. While labor costs and government-mandated fringe benefits total about $2.59 an hour in Mexico, they amount to less than $1 an hour in China." To compete, Mexican factories have to cut costs -- including labor costs -- and move products out faster.

So where will the agricultural workers go? Where will the unemployed factory workers go? Where their fellow citizens have gone in the past, either to the cities or, as said the Times, "to the United States -- a potent symbol of frustration that many here feel with free trade."

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