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Op-Ed Columnist: What’s That Sound?
April 1, 2004
By THOMAS L. FRIEDMAN
MEXICO CITY
I hadn't been to Mexico since 1996, so it definitely caught
my ear when I started to hear two non-Spanish words on this
trip that I'd never heard here before: "China" and "India."
Mexicans are increasingly aware that these two countries
are running off with jobs and markets that Mexicans once
thought they owned. You have to feel sorry for the
Mexicans: they are hearing "the giant sucking sound" in
stereo these days - from China in one ear and India in the
other. Worse, they seem stuck, unable to forge a coherent
strategic response.
"We are caught between India and China," remarked Jorge
Castañeda, the former Mexican foreign minister who just
decided to run for president in 2006. "We have lost about
500,000 manufacturing jobs. It is very difficult for us to
compete with the Chinese, except with high-value-added
industries. Where we should be competing, in the services
area, we are hit by the Indians with their back offices and
call centers. . . . Not enough people here speak English."
And that's not all. While China and India each send tens of
thousands of students to be educated abroad every year in
science and engineering, particularly in the U.S., Mexico
sends just 10,000.
Go into any discount store in Mexico and look at low-priced
clothing, toys, shoes and electronics, or even some
Christian religious objects, and it is hard not to buy
Chinese, added Mr. Castañeda, speaking at the Mexican
Council on Foreign Relations. But more important, "the U.S.
markets that we had a corner on is where we are losing
jobs. . . . We knew it would happen when China [entered the
World Trade Organization in 2001], but we did not get
prepared."
Mexico's problem, in a nutshell, is this: The world is flat
- or at least getting flatter. Thanks to PC's,
telecommunication advances and market-opening agreements,
capital can seek out factories and knowledge workers
anywhere in the world with greater and greater ease. To get
itself in shape to sign the Nafta free-trade accord with
the U.S. and Canada, Mexico did what I would call the
"wholesale" reforms - and they have been incredibly
impressive. It made a historic transition to freer markets
and democracy, with respect for human rights and fair
elections.
But with China attracting huge amounts of dollars to put
its low-wage workers to work on all sorts of industrial
exports, and with India now able to export its low-wage
brainpower over phone lines and fiber-optic cables,
Mexico's advantages in the U.S. market - its proximity and
Nafta - are being eroded. Mexico can stay ahead only if it
does "retail reforms."
These are the micro reforms that will make its economy more
flexible and productive. The government has set out five
areas for reform: labor markets; the judiciary; the
constitution and electoral system; tax collection, which is
abysmal; and opening the energy and electricity markets to
foreign investors so a gas-rich country like Mexico gets
out of the crazy situation of importing natural gas and
gasoline from America.
The old autocratic Mexico could have ordered these reforms
from above. That's how China still does it, giving Beijing
an advantage now that it will pay for later. But because
Mexico is now a democracy, and needs to remain competitive,
it can upgrade its institutions only by going through the
messy, time-consuming process of consensus building. Alas,
President Vicente Fox has not been very good at building
consensus.
"We did the first stages of structural reform from the top
down," said Guillermo Ortiz, the governor of Mexico's
central bank. "The next stage is much more difficult. You
have to work from the bottom up. You have to create the
wider consensus to push the reforms in a democratic
context. . . . There is an urgency for Mexico to finish the
structural reforms at the micro level."
Why? Because while Mexico upgraded its competitiveness,
notes the analyst Daniel Rosen in the journal The
International Economy, China upgraded worker education,
infrastructure, management skills, technology and quality
controls even faster.
Will Rogers said it a long time ago: "Even if you're on the
right track, you'll get run over if you just sit there."
Mexico has put itself on the right track. But for the
moment, it's just sitting there. If it doesn't start moving
again, it's going to get run over by China, India, America
- or all of the above.
But America had better not be a passive spectator, as it
has been in these Bush years, because if Mexico gets hit,
we, too, will feel its pain.
http://www.nytimes.com/2004/04/01/opinion/01FRIE.html?ex=1081868013&ei=1&en=a8c660b58d40b146
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