It’s a trade war being fought in the streets: Mexico’s army of 1.6 million street vendors is resisting police attempts to confiscate imports from China, and the government has responded with everything from buy-Mexican ads to a special anti-import police squad.

Long known for the work of its artisans, Mexico now imports such handicrafts as painted figurines of Mexican saints and leather sandals from China. This year, China also displaced Mexico as the second-biggest exporter to the U.S. market, leaving Mexicans feeling cheated and worried the country is being left behind.

“It’s not just fear, it’s panic,” said Mexico City historian Lorenzo Meyer. “We were supposed to be the ones moving ahead. We had free-market reforms, and now we’re losing out to a communist-run country. In 500 years, this country has never been able to get ahead economically.”

Newspapers regularly run stories on the threat. “The Chinese want Mexico’s oil,” “Chinese products proliferate in handicraft markets,” and “Border factories fight Chinese threat” are just a few recent examples.

Mexico’s frustration at being outmaneuvered in low-wage manufacturing has generated a rising tide of anger at the Asian giant. Textile and shoe workers have begun trashing Chinese goods in the streets. The government has started airing “Buy Mexican” ad campaigns, and police have rounded up Asian vendors and staged increasingly violent raids against street stalls selling contraband imports.

The anger isn’t just over imported goods. Since 2000, Mexico has lost more than 200,000 maquiladora, or manufacture-for-export, jobs, with many factories moving to China.

The damage is everywhere. China is producing statuettes of Mexico’s patron saint, the Virgin of Guadalupe. And plastic Chinese flip-flops are the preferred footwear in many parts of rural Mexico, replacing Mexican leather sandals that had been worn here for centuries.

In the north-central state of Guanajuato, dozens of shoemaking businesses have closed recently, including Botas Fox, the family business of President Vicente Fox. Shoemakers complain they are being driven out of business by cheap Chinese imports.

“We just can’t compete with the labor costs,” said Sandra Santamaria, project director for Mexico’s Apparel Industry Chamber. “Labor in China costs 48 cents per hour, and in Mexico it’s $1.20.”

Mexico has imposed dumping duties of more than 500 percent on Chinese apparel, but that hasn’t stemmed the influx. Many Chinese goods are smuggled in or imported under labels from other countries. Not including these clandestine goods, China currently runs a trade surplus with Mexico of more than $5 billion.

Some Mexicans blame themselves. “We’ve never been able to defend ourselves against the Americans, or the Chinese,” said one anti-import sign posted outside a Mexican clothing store. “But, then again, we haven’t seen any Chinese. All we see are disloyal Mexicans who don’t want to pay for Mexican goods.”

Fox, who has described China as “an opportunity, not a threat,” created a special anti-contraband police squad in October, but it remains to be seen how effective it will be.

In one recent raid in Mexico City, police rounded up Koreans — who allegedly run many of the import operations — and deported 11 of them, drawing complaints of discrimination from the Korean community.

Earlier this year, police raids on contraband markets in Mexico City earlier this year met with resistance from vendors who hurled sticks and stones and trashed vehicles to defend their merchandise.

Some have said it’s not a bad thing that low-wage jobs are fleeing to China.

“It forces Mexico to do more value-added, better-educated work,” Deputy Economy Secretary Angel Villalobos said.

The Chinese have argued Mexico should improve its own products, rather than complaining about other countries.

“China was inundated with foreign products, but we did not blame those countries. Instead, we learned how to produce like them,” said Xingmin Yin, the deputy director of Fudan University’s China Center for Economic Studies in Shanghai.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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