“The Donald” Trumps NAFTA Boondoggle
by Dr. Robert Owens 5/27/2020
For years labor leaders, America Firsters, and just about anyone who paid attention have railed against the unfair, job killing, economy destroying one-sided giveaway Bill Clinton and Progressive Democrats foisted on America.
NAFTA allowed and by providing economic incentives encouraged large multi-national corporations to outsource not only jobs but also production. American automobile manufacturers led the way and became the prime example of the offshoring movement. Back in 1994, when NAFTA first descended on the American worker like a plague, the average American autoworker earned about $36 an hour in today’s dollars. The average Mexican autoworker, meanwhile, earned just $6.65 per hour.
Once NAFTA opened the gates to unlimited and untaxed imports from Mexico taking advantage of this cheap labor U.S. auto companies began moving their production to Mexico. The numbers working in auto factories in Mexico tell the story. Back in the pre-NAFTA days Mexican auto factories employed about 100,000. By 2016, after NAFTA that figure grew to 767,000.
This astounding growth cost many American workers their jobs. The number of Americans working in the American auto industry fell from about 1.1 million in 1994 to 940,000 in 2016. And their average wages dropped to about $28 per hour. This drop in pay was forced on the unions when the companies threatened to outsource even more jobs if workers didn’t accept the loss of pay and benefits.
Between 1993 and 2014, the U.S.-Mexico trade balance swung from a $1.7 billion U.S. surplus to a $54 billion deficit. Economists such as Dean Baker of the Center for Economic and Policy Research and Robert Scott, chief economist at the Economic Policy Institute, argue that the consequent surge of imports from Mexico into the U.S. coincided with the loss of up to 600,000 U.S. jobs over two decades.
Then Came Trump.
After a long delay of more than a year caused by Nancy Pelosi and the impeachment lynch mob the House finally passed the United States Canada Mexico Agreement (USMCA). The Senate quickly followed suit and President Trump signed the new and improved trade deal replacing the job killing NAFTA. This is the upgrade 21st-century America needs. The USMCA strengthens labor protections, creates jobs, and discourages U.S. firms from outsourcing American jobs to Mexico.
Trump’s USMCA combats this exporting of America’s industrial base in several ways.
First, the trade pact stipulates that Mexican factories paying employees at least $16 an hour must account for half of all car parts by 2023. High tariffs will be placed on cars sold in America that don’t meet this threshold. This wage requirement is almost like a poison pill for Mexican auto imports since the wages of autoworkers south of the border don’t come anywhere close to this amount.
Second, USMCA also calls for a minimum of 75% of vehicle parts must be manufactured in either the United States, Mexico, or Canada. This is an increase from the 62.5% required by NAFTA. If this goal is not achieved there will be stiff tariffs on the incoming parts and the vehicles. This will encourage US manufacturers to buy American instead of from foreign sources with lower labor costs.
Just these two aspects of Trump’s USMCA will increase the production and sale of cars more nearly made in America than the current situation where autos tend to be international projects sold with American name brands. It has been estimated this could result in as much as Thirty-four billion dollars of investment in American auto manufacturers, which in turn would bring investments in construction and wages. Some have said these two changes alone might result in as many as 76,000 new U.S. automotive jobs over the next five years.
And adhering to Trump’s well-known negotiating style of crafting win-win deals, USMCA wouldn’t just help Americans. One of the requirements of the pact is that Mexico guarantees the right of their workers to unionize for collective bargaining. It also requires the establishment of what Americans have come to see as basic rights for working people, but which are innovations in the Mexican economy. Such things as independent agencies to rule on labor disputes, an end to both gender and racial discrimination, and child labor.
These types of actions will finally start to level the playing field. And as Mexican wages and benefits rise to more nearly American standards companies will have fewer incentives to move their purchasing or manufacturing south of the border. Also, as the Mexican economy begins to provide a living wage to more and more of its citizens less and less will have a reason to come north.
Unions march in lockstep to the democrat drum. They contribute money and manpower to the Democrat political machine. They’ve complained loudly and continually about NAFTA since before its passage and every day through its entire blighted reign as a drag on the American economy. Finally, someone stepped into the breach and fought the good fight to end this bad deal.
Trump has done it. After more than a year of holding it hostage to their impeachment/coup attempt Nancy Pelosi and her minions finally passed it. The President signed it. Now let’s see if the union bosses will admit which side of their bread is buttered, or will they bite the hand that feeds them? Whatever the bosses do I’m betting a large percentage of union members will shake off their pre-programmed allegiance to bi-coastal elites, the permanent bureaucracy, and their media megaphone.