Competing Globally

01 Apr 2004|Steve Diller

Thomas Friedman had an interesting column in the New York Times this morning about a dilemma Mexico is facing. When the country signed NAFTA, the leadership there may have assumed that they could take advantage of free trade with the US by offering low-wage manufacturing labor to multinationals. Now, however, free trade with the rest of the world is increasingly shutting Mexican labor out of the market. Turns out China and India can compete even more effectively on labor prices.

Mexico’s elite seems to have made the mistake of assuming that, in a dynamic market, they could simply select a niche for themselves and focus only on that. Meanwhile, they may have missed more enduring advantages. Just as the Indian government never realized that its training of engineers, English in the schools, and a consistent legal system could ever lead to being the back-office of the world, Mexico doesn’t seem to appreciate the value of its culture in moving forward.

The traditional warmth and human-centered values of Mexico could offer a huge competitive advantage in areas such as customer service. Tourism could be focused more on “high touch” services than simply placing cookie-cutter hotels along a beautiful shoreline.

While I dislike the knee-jerk Libertarian idea that government should just get out of the way and let the market rule, when the global economy is in such flux, maybe the best thing governments can do is avoid industrial policies and focus on developing their people’s ability to interact with the world as freely as possible. Basically, that means investing in infrastructure, education and technological development. In the current environment, Mexico’s enduring advantages would probably come to to the fore much more quickly.

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