THE LABOR SITUATION OF THE MEXICAN TEXTILE AND

UNCLAS SECTION 01 OF 05 MEXICO 004246

SIPDIS

SIPDIS

STATE FOR DRL/AWH AND ILCSR, WHA FOR MEX AND PPC, USDOL FOR
ILAB
STATE FOR EB/TPP, EAP/CM
STATE PASS USTR FOR EISSENSTAT/STRATFORD/QUESENBERRY
COMMERCE FOR ITA/OTEXA
DHS/CPB FOR JLABUDA AND BFENNESSY

E.O. 12958: N/A
TAGS: ELAB ECON ETRD KTEX PGOV PINR CH MX
SUBJECT: THE LABOR SITUATION OF THE MEXICAN TEXTILE AND
CLOTHING INDUSTRIES

REF: (A) MEXICO 2858 (B) MEXICO 4150 (C) MEXICO 616

MEXICO 00004246 001.2 OF 005



1. SUMMARY: Beginning on July 31, the Mexico office of the
Friedrich Ebert Stiftung (FES) foundation, a German
non-profit organization, and the International Textile,
Garment and Leather Workers Federation (ITGLWF) held a two
day seminar on the &Future of the Textile Industry in
Mexico.8 The seminar was attended by representatives of
various textile unions, labor lawyers, academics, NGOs,
social activists, spokespersons for Mexico,s textile
industry and Mission Mexico,s Labor Counselor. The goal of
the seminar was to present an overview of the textile and
clothing industries which have lost over 300,000 jobs since
2000, suggest urgent &next steps8 to strengthen these
industries and form a working group that would recommend
practical actions to implement these steps. The seminar,s
participants devoted a disproportionate amount of time to
what they saw as unfair Chinese competition, the endless
flood of contraband Asian textile and clothing products
entering Mexico, and the shortcomings of the GOM in failing
to support the textile industry. They also focused
considerable criticism on NAFTA and its impact on the Mexican
textile and clothing industries. In the end, the seminar,s
participants were able to form a working group but it was
prevented from reaching an agreement on &next steps8 when a
union affiliated with Mexico,s main opposition political
party effectively insisted on obtaining the perfect to the
detriment of the good. END SUMMARY.


TEXTILE UNIONS AND INDUSTRY ARE CALLED TO ORDER
-------------- --


2. From July 31-August 1, the Mexico office of the Friedrich
Ebert Stiftung (FES) foundation, a German non-profit
organization, and the International Textile, Garment and
Leather Workers Federation (ITGLWF) held a two day seminar on
the &Future of the Textile Industry in Mexico.8 The
seminar was attended by various textile union representatives
affiliated with Mexico,s three largest labor federations;
the Confederation of Mexican Workers (CTM),the National
Workers Union/Authentic Workers, Front (UNT/FAT) and the
Revolutionary Confederation of Workers and Peasants (CROC).
Also, present were labor lawyers, academics from several
Mexico City area universities, national and international
NGOs, social activists and spokespersons for Mexico,s
textile industry.


3. The goal of the seminar was to present an informed
overview of the Mexican textile and clothing industries which
have lost over 300,000 jobs since 2000 (ref A),suggest
urgent next steps to help these industries and to form a
working group that would recommend practical actions to
implement these &next steps.8 The main moderators at the
event were Jose Rafael Ramirez Vera, the Secretary General of
ITGLWF,s Inter-American Region and Ines Gonzalez Nicolas,
the FES Coordinator for Labor and Gender Issues. Between
them they laid out an agenda for the seminar, kept the event
on track, initiated a number of panel discussions and, with
one significant exception, successfully moderated rivalries
between the three labor federations, the social activists and
spokespersons for the industry representatives.


ACADEMIC PRESENTS HARD REALITIES OF THE TEXTILE INDUSTRY

MEXICO 00004246 002.2 OF 005


-------------- --------------


4. During the two day seminar various academics, from a wide
range of perspectives, made detailed presentations about the
state of Mexico,s textile industry and the reasons for its
decline. Of these presentations, perhaps the most
comprehensive was made by Dr. Graciela Bensusan Areous of the
Autonomous Metropolitan University-Xochimilco (UAM-X). Dr.
Bensusan,s presentation offered an overview of Mexico,s
textile and clothing industries that underscored the problems
of these sectors of the economy in which many different
actors are at fault but did so without fixing an undue
portion of blame on any particular person or group.


5. According to Dr. Bensusan,s own work and that of several
other researchers she cited, in 2001 Mexico,s textile and
clothing industries employed some 700,000 workers nationwide.
At that time the production of these workers accounted for
75 percent of Mexico,s maquiladora (foreign owned-assembly
plants) exports. The main areas for textile/clothing
production were the states of Coahuila, Puebla, the State of
Mexico, Mexico City, Aguascalientes and Yucatan. The textile
and clothing industries flourished in these states because of
state government policies that favored foreign investment,
low salaries and an abundance of manual laborers. Moreover,
from about 1998 until 2002 Mexico was the main supplier of
textile and clothing products to the US. All of these
factors helped to make Mexico,s textile and clothing
industries appear healthier than they really were. After
2002, world competition from China and other Asian countries
overtook Mexico as the US, main supplier of textile and
clothing products.


6. As part of her presentation Dr. Bensusan cited an
International Labor Organization (ILO) study which listed a
number of common factors among countries with large
textile/clothing industries. The common factors included such
items as: high employee turnover; poorly trained workers; low
salaries; low levels of unionization and poor leadership
among the unions that do exist; child labor; high level of
off-the-books labor and unregistered businesses (informal
economy Ref B); and sex discrimination. Using the state of
Puebla as an example of prevalent practices in Mexico,s
textile/clothing industries, Dr. Bensusan stated the
following: 63 percent of the textile/clothing industry
workers in Puebla are women; 57 percent of the workers are
very young (exact age range not stated); the state has a
large percentage of unregistered small family businesses
operating on the informal economy; and only 15 percent of
surveyed businesses were unionized.


7. Continuing on, Dr. Bensusan pointed out that Mexico,s
labor laws in general, and their application in the textile
and clothing industries in particular, has led to a wide
range of problems. She pointed out that business owners
often complain that the high costs associated with full
compliance with the country,s labor laws makes Mexico
uncompetitive. Dr. Bensusan acknowledged that full
compliance with the law might be costly but stated that there
were so few penalties for non-compliance that many
businessmen simply ignored the law and then pocketed the
savings.


8. She then went on to list other problems in the textile
and clothing industries from the perspective of laborers

MEXICO 00004246 003.2 OF 005


being mistreated by management. These problems included: the
high number of temporary and part-time workers in the
industry (60 percent of all industry workers in 2005); high
rates of employee turnover (60 percent in the industry vs. 40
person nationally for other manufacturing workers); firings
without cause; non-payment of legally mandated employee
benefits; widespread sex discrimination; and salary payments
on piecemeal basis that is less than the legal minimum wage.



9. Dr. Bensusan then balanced her presentation with a
discussion of workers being mistreated by the various textile
labor unions. In this she faulted: the poor quality of union
leadership which can perpetuate their mandates almost
indefinitely; the difficulties unions have of standing up to
government or to employers; a near total lack of democracy or
openness within the unions; in order to avoid conflicts,
union leaders will not strike no matter what.


IT IS ALL CHINA,S FAULT
--------------


10. A continuing theme repeated almost endlessly throughout
the seminar was the issue of &unfair8 competition from
China and other countries in Asia. Complaints against China
were made by union representatives, industry spokespersons
and even the academics (although to a much less degree). All
of the various union representatives at the seminar
complained about China but the most often repeated and
intellectually unproductive comment came from the senior
leadership of the CTM. The comments of the elder CTM leaders
notwithstanding, to varying degrees, most of the seminar
participants were in rough agreement on the topic of
competition from China and Asia.


11. Almost without exception, the seminar,s participants
described competition from China as &unfair8. Many
participants from the union and from industry underscored the
injustice of expecting Mexico to compete on an equal basis
with China which is not a market economy. As such, the
argument went, China allows its numerous state-owned textile
and clothing businesses to operate at a loss (something
Mexican firms cannot do). It was also repeatedly pointed out
that China provides its industries with numerous subsidies
that are specifically prohibited by the WTO.


12. A great many seminar participants also mentioned that
China does not have independent unions and does not respect
basic worker rights. According to the participants, an
important element of the unfair advantage China has is that
by not respecting worker rights (or environmental standards),
it will always be able to produce goods at a lower cost than
Mexico. (Comment: Post notes that Mexico is not exactly
flawless when it comes to respecting and complying with
worker rights and environmental standards ) this was echoed
by several NGO and labor participants.)


EXCEPT FOR WHEN THE GOVERNMENT, OR NAFTA, ARE TO BLAME
-------------- --------------


13. The only actor to receive as much criticism during the
seminar as China was the Mexican Government. The criticisms
against the GOM were not repeated as often as those against

MEXICO 00004246 004.2 OF 005


China, nor were they as emotional, but they were just as
widely shared. One speaker after another detailed the
failings of the GOM, because of either incompetence or
corruption, to support Mexico,s textile and clothing
industries. The GOM,s Secretariat of the Economy and its
Customs Services were the main focus of the participants,
displeasure. Economy was attacked for its perceived failures
both nationally and internationally. Nationally, it was
faulted for things like failing to help lower electricity
rates charged by the government monopoly to facilitate
shift work and thereby increase productivity; internationally
it was faulted for not pressing forcefully enough for Mexican
industry in the WTO (Note: Mexico is currently pressing a
complaint against Chinese subsidies via the WTO,s dispute
settlement process.).


14. Mexican Customs was faulted for not controlling the
problem of contraband. Mexico, the participants all agreed,
was being overrun by contraband of all types but especially
with textile and clothing products. One presenter asserted,
correctly according to many seminar participants, that
because of the flood or contraband entering Mexico the
country,s textile and clothing industries now only supply 20
percent of total domestic demand. The other 80 percent is
being supplied by the purveyors of contraband goods. (Note:
One of the main reasons for the high level of contraband
imports is that Mexico has extremely high anti-dumping duties
in place versus a huge swath of Chinese textile and apparel
products. In December 2007, China will finally, under the
terms of its bilateral WTO accession deal with Mexico, be
able to challenge these anti-dumping duties before the WTO,s
dispute settlement mechanism. Mexican manufacturers are
strongly lobbying the GOM to maintain these trade measures,
while the GOM is considering whether they are consistent with
WTO rules and urging industry to provide evidence to support
their claims of dumping. See ref C for more details.)


15. Coming in at a distant, but nevertheless significant,
third place for criticism was NAFTA. There was not as wide a
range of agreement on the problems caused by NAFTA as there
was on the evils of China or the GOM but what its critics
lacked in numbers they made up for in emotion. The main
critics of NAFTA were the participants from Mexican NGOS and
the UNT/FAT which is closely linked to Mexico,s main
opposition party, the Party of the Democratic Revolution
(PRD). NAFTA,s critics asserted that the trade agreement
was &imposed8 on Mexico when two developed countries ganged
up on a developing country. As a result, the critics said,
Mexico was forced to compete internationally before it was
ready. NAFTA (and by extension the USG) was also criticized
for creating the conditions in which triangulation (goods
coming from Asia which are supposedly destined for sale in
the US but which ultimately end up in Mexico as contraband)
has so severely and negatively impacted the domestic textile
and clothing industries.


WORKING GROUP UNABLE TO PROPOSE NEXT STEPS
--------------


16. At about the mid-point in the seminar its two moderators
proposed the names of several participants to form a working
group that would be charged with taking the information
presented during the two days of discussion and developing
realistic next steps. The working group was composed of

MEXICO 00004246 005.2 OF 005


individuals from the three unions present: the CTM, CROC and
the UNT/FAT. Later Mission Mexico Labor Counselor was
invited to join to help discuss the problems of contraband
and triangulation. (Note: Embassy,s ECON, CBP, and ICE
offices are discussing possible joint actions against
triangulated contraband networks.) The first meeting of the
group was informally called to order at the end of the
seminar and as a courtesy the UNT/FAT was first for their
ideas on next steps.


17. Rather than address this subject the UNT/FAT asserted
there was no point to discussing next steps while there were
still so many issues related to union accountability,
transparency, freedom of association ) a worker,s ability
to join any union he or she wants, and inter-union relations.
The UNT/FAT then began a blistering attack on the CTM and
CROC, but more particularly on the latter, which it claimed
was doing everything possible in the state of Puebla to
prevent workers dissatisfied with one union from leaving and
joining another. The UNT/FAT remarks (which contain much more
than a grain of truth) prompted the CROC and the CTM to
defend themselves. Ultimately, the time to discuss realistic
next steps ran out and the only agreement reached was that
the group would meet again soon at the offices of the FES for
further discussion: exact date TBD.


COMMENT
--------------

If nothing else, the FES/ITGLWF seminar showed that the
various elements of Mexico,s textile and clothing industries
may not know what they are for but they certainly know what
they are against. They are against &unfair8 competition
from China, against contraband, against ineffective and
corrupt government, against NAFTA and against each other. It
was disappointing that one textile union did not use the
opportunity to discuss realistic next steps the industry
could consider to help focus efforts on future actions and
chose instead to advocate for a perfect resolution of all of
Mexico,s (very real) labor union problems before it would
consider joining efforts to develop solutions that might help
real workers hold on to real jobs.


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http://www.state.sgov.gov/p/wha/mexicocity and the North American
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