NAFTA means that U.S. companies can alleviate comparative disadvantages in labor and raw material costs by establishing factories in Mexico where these are cheaper.

The average yearly income on the U.S. side of the border is $14,000, whereas the average yearly income on the Mexican side is $3,700.

Companies such as Lucent Technologies and General Motors are opening factories along the Mexico-U.S. border. There are 1,500 maquiladoras (a term that means foreign-owned) production facilities in this fast-growing area. These are crucial for large corporations to compete with Asian countries, which also enjoy high-tech materials and low-cost labor.

Critics point out that since NAFTA was enacted, U.S. trade with Mexico has slipped from a surplus to a $16 billion deficit.

Theoretically, this means a loss of 224,000 U.S. jobs. In El Paso, Texas, the unemployment rate has risen from 10% to 11.7% since NAFTA.

However, U.S. towns like McAllen, Texas, have found that by promoting Mexican factories near them, U.S. suppliers and contractors servicing the maquiladoras can increase business and employment.

The McAllen Economic Development Corporation is typical of U.S.-led initiatives to lure investment into this region. Its web site is:

http://www.medc.org/index.html

Zenith Electronics, an electronics and TV manufacturer, has this type of arrangement. Zenith combines cheap Mexican labor and U.S. high tech know-how in an effort to regain market share from Asian competitors that nearly wiped it out during the 1980s. Zenith's web site is:

http://www.zenith.com/

Of course, there are advantages and disadvantages for Illinois-based Zenith in locating a production facility in Reynosa, Mexico. It gains a cheap labor source, but it also has to cope with allegations of worker exploitation.

There were also allegations that Zenith’s Mexican plant pays extraordinarily low wages; that environmental or workplace safety regulations are looser than in the U.S.; and that workers in the U.S. were induced to accept pay cuts under threat of job relocation to Mexico.

Following NAFTA, Zenith did, in fact, lay off several hundred U.S. workers:

http://caq.com/CAQ54nafta.html

For alternative views on NAFTA, maquiladoras, and alleged exploitation, check the following references.

Allegations of labor exploitation along the border are detailed in "With His Lawbook in His Hand" By Karen Olsson
Texas Observer; October 25, 1996:

http://www.hyperweb.com/TXObserver/lawbook.htm

There have also been problems with organized labor and allegations that workers' health is suffering:

http://www.essential.org/monitor/hyper/mm0593.html