NOVEMBER 15, 1985 - VOLUME 6 - NUMBER 16
Fighting Capital Flight
by Aaron Freiwald
In July of this year, General Motors Corporation-after inspiring 48 states and hundreds of communities to march to GM headquarters with proposals that would slash the companies operating costs at the expense of ordinary taxpayers-announced that the quiet, rural town of Spring Hill, Tennessee was the ideal site for its state-of-the-art Saturn plant. Less than two weeks later, Allied Corporation-manufacturer of many of the seat belts that go in GM cars-announced that Tennessee was actually a somewhat less than ideal site for its operations, and that it was moving its Knoxville plant to Mexico via Alabama, taking with it over 200 jobs.
Although many people in Tennessee rejoiced after the long-awaited Saturn site decision-particularly elected officials, who viewed it as a masterful coup over the traditional automobile manufacturing states-the decision of Allied Corporation to abandon the state underlined the U.S. labor force's tenuous hold on domestic manufacturing jobs.
Measured by the standards of corporate America, Tennessee has numerous attractions: cheap and plentiful labor; no state taxes; and an almost non-existent labor movement. To General Motors, these factors, combined with the state's central location and the willingness of the state government to offer the company a subsidy package worth millions of dollars, made the Spring Hill site irresistible.
Yet, as Allied Corporation informed its soon-to-be-former employees, production costs in Mexico are even cheaper. And, because several of Allied's competitors in the seat belt manufacturing business had already moved their facilities south of the border, the company was no longer competitive as a U.S.-based corporation.
"They claim it's purely a question of being able to compete for the bids of Chrysler, Ford and General Motors, and the only way to compete is on price,' said Doug Gamble, a representative for the Textile Division of the Amalgamated Clothing and Textile Workers Union.
And while the average wage of the workers at the Knoxville plant-$5.20 per hour-is significantly less than the average hourly wage in U.S. manufacturing, it is nearly seven times the hourly wage paid to the laborers in many of the maquiladora plants just inside Mexico.
As a result, U.S. workers and their unions are increasingly confronting similar challenges to the U.S. industrial job base. From the automobile and electronics industries to the textile and chemical plants, multinational corporations are taking advantage of the low-wage, low-overhead operations available along the southern side of the U.S.-Mexican border.
Although there are no specific calculations as to the jobs that have already been lost to border industries, most experts agree there is reason for concern.
"I think job loss is substantial," said Steve Beckman, an international economist with the United Auto Workers. "And I don't think there is any doubt that it is going to get worse in the future."
Chrysler is already importing a few cars from Mexico and Ford plans to begin producing cars in Mexico for sale in the United States, said Beckman. A General Motors plant in Rochester, New York that produced permanent magnets for electrical components was transferred lock, stock and barrel to Mexico, said Doug Meyer, associate research director with the International Union of Electricians (IUE). GM even sent the managers of the Rochester plant to the border, putting them up in houses on the U.S. side and letting them commute to work.
It is this proximity that makes Mexico so ideal for U.S. multinationals. While labor costs are drastically decreased-and costs for complying with occupational safety and health standards virtually eliminated-transportation and other expenses incurred as a result of transnational relocation are only modestly higher than those of U.S.-based facilities.
To combat the accelerated multinational capital mobility, the American labor movement is seeking "job security" clauses in contracts negotiated between workers and employers. But even the strongest contracts can't stop a company from shifting an ever-increasing portion of its work to its maquiladora facilities, and, as the labor movement's ability to enforce such contracts wanes, real job security remains unattainable.
A more universal solution is being sought through legislation. A plant closure bill was recently introduced in the U.S. House of Representatives. Although the bill was considered tame-it simply required companies to give 90-days notice before closing down domestic operations and to confer, but not agree, with labor-it lost by five votes.
Others in the labor movement are looking for protective legislation as the only alternative to slow the capital hemorrhage from the United States.
According to Mark Anderson, from the department of economic research at the AFL-CIO, the major way to stop the flow of capital from the United States-especially in the manufacturing sector-is through trade policy. "Limiting imports is a major avenue open to us now," he said.
But there too, labor faces not only an adamantly unwilling president, but an unconvinced Congress. Numerous pieces of legislation to protect American jobs by governing trade policy were introduced in the last session of Congress, only to flounder in committee, or die in floor votes.
Attempts at legislative redress have not, however, been totally unsuccessful. Last year, Congress allowed labor a substantial victory when, under the Generalized System of Preference (GSP) re-authorization bill, it required enforcement of basic labor rights as a condition to receiving benefits offered under the system. GSP is a an aid program that allows certain countries duty-free treatment on a percentage basis in order to encourage development.
Labor leaders were quick to seize the opportunity to both encourage labor rights abroad and stop incentives for investment to some of the most egregious offenders. Several countries were singled out in testimony as being undeserving of GSP benefits since labor conditions did not meet minimum standards.
"The implicit assumption here is that a lot of jobs move overseas because of the exploitation of workers overseas," said Doug Meyer of the IUE. By keeping countries from receiving GSP benefits that don't allow free association or guarantee minimum wage and working conditions, U.S. unions can champion the cause of workers worldwide, while stymieing corporate flight from the United States.
Yet, championing the cause of workers worldwide is precisely where many U.S. unions have failed to prove effective. Instead of concentrating on measures to redress the imbalances between the workers of the United States and the Third World-the root cause of corporate flight-unions have focused on stop gap efforts to keep plants open, gain prior notice of plant closings, and enact protective legislation.
International unionization, however, is rife with obstacles. From charges of paternalism and severe wage discrepancies to the resource and logistical difficulties involved, the task is all but overwhelming.
Even with these obstacles, however, uniting workers internationally is the only viable long-term solution available to the plight of U.S. workers.
"It's the most realistic alternative-to use the resources of organized labor in order to establish channels of communications between workers across international borders," said M. Patricia Fernandez Kelly, at the Center for U.S.-Mexican Studies.
But unionizing in the Mexican border towns will be difficult. The industries that are the most prevalent are textiles and electronics, two areas where it has been hard for U.S. labor to gain a firm hold, even in the United States.
For example, in 1983 11,000 workers at a Zenith plant in Reynosa, Mexico walked out in one of the largest and most promising unionization attempts. The workers, nearly all of them women, were angered over the fact that they were not allowed to elect their own union representatives. Although the strike was long and well-organized, in the end it was broken and the workers gained little.
The Mexican unions have been hesitant to aggressively unionize for fear U.S. companies could easily find another maquiladora along the border with which to do business. "The unions don't want to kill the hens that lay the eggs," said Fernandez Kelly.
Industry-wide multinational unions, however, could stop the pitting of border towns against each other and help curb corporate flight. But the primary obstacle to multinational unionization-disagreement over how to best overcome wage discrepancies between U.S. and Third World laborers-remains.
For Doug Gamble in Tennessee, however, the wage differential is not the dividing factor but what can potentially unite Mexican and U.S. workers. Neither, says Gamble, is getting a fair or livable wage from their multinational employees.
"It's real clear evidence why workers in this country and workers in Mexico have got exactly the same objectives," he says. "In the long run if we don't work together they're just going to keep playing us all off each other until everybody is poor."
But, adds Gamble, "How you translate that into anything other than frustration is a mystery to me."
Aaron Freiwald is a freelance writer currently based in Mexico City, Mexico.