A quick look back at NAFTA; how did we do?

Stabilizing trade relations with your bordering neighbors is a smart move indeed. Did NAFTA live up to the objectives set forth? Two decades before we initiated NAFTA, there were issues which needed to be resolved to keep peace and help Mexico move up in the World to her full potential. Today NAFTA, which covers all of North America and Mexico and a few other partners has rules such as 51% of all vehicles are to be built in a NAFTA country. Again the reason why BMW, Mercedes, Honda, Toyota, Nissan all have plants here. Also why American auto makers moved plants just South of the border to save on labor costs and onerous regulations. These from foreign European and Japanese makers thankfully must hire labor from here in the states where they are located, which is good for the workers and employment. But most of modern automobile manufacturing today is built by robotics. And much is also built in Canada and Mexico. In Mexico it costs US companies 50% to send over business equipment as an extra tariff. US companies have huge factories over the borders in Juarez near El Paso and over the borders from Laredo and Brownsville, TX. Besides NAFTA there are huge trade organizations and treaties. NAFTA has been a big devastator of jobs for textiles, shoes, etc. in Monterrey Mexico all those jobs now have moved to China due to the WTO affiliation of those two nations.

Previously in the Southern States were factories for carpets, shoes, clothes, linen, suitcases, furniture, etc., but after NAFTA most of those jobs went to Mexico. Now to China and even today China says they are losing those jobs to other countries with lower wages as Chinas industrial revolution looms as they try to hold down their economy and currency. In hind sight the workers in GA, AL, TN, SC, NC, etc. are asking well look what great job that did, we help Mexico by giving up our jobs and they give those jobs to China and then the Mexicans come to this country and take more jobs? And to some extent they are correct. But that is not all that was affected. If you look at all the old mills in New England those factories closed too, workers would not take a pay cut or work the Fredrick Winslow Taylor. Instead demanding greater benefits with less production and productivity.

You may wish to read Collision Course by Micheline Maynard. Not a pretty site. Also NAFTA and another book; Selling of Free Trade: NAFTA, Washington, and the Subversion of American Democracy by John Macarthur. You can debate both sides, well I can. The idea of free trade is fine really if all things were equal. Well all things are not equal; we have in this country all sorts of laws. OSHA, EPA and over regulations in all industries many over lapping and then through in states like CA, MA and it is a wonder you could produce any thing. Including a toothpick, which by the way for such a simplistic item, you would not believe the regulations. Think about it, the darn items come from wood and trees. You want to back track to the timber industry in Aberdeen, Washington? Forget the fact that all the trees were cut down outside Bangladesh and the great floods a mud came later. We have environmental laws here so the tooth pick manufacturer will have to get the wood from somewhere, where it is okay to cut down the forest. Thus timber jobs are a loser, paper manufacturing is a loser, building materials like trusses etc, must come from somewhere else. Otherwise you find you self in the middle of a lawsuit-Sierra Club. Well then the builders need to make sure they have supply so when Enron decided to sell timber futures they found the best deal in Canada, who was checkerboard clear cutting. But with housing growth in the US propping up the economy along with financial institutions loaning on new housing starts the game continued. However the timber industry in Canada was abusing its environment and upsetting the people there. Since they were dumping, selling below the cost to reproduce the forest of which they had no intention like that of the US, which is required by our laws to replant the forests, which you can see in ID, WA, OR, CA and it is extremely prevalent in the Olympia Peninsula.

When over regulation makes it impossible to compete and manufacturers cannot make up the difference and the labor unions will not help to streamline, work more efficient and demand the same high pay while taking the productivity needed to sustain the company for granted the company has no choice but to close the facility and manufacture somewhere else or close the company all together for instance the PillowTex Company a long time hold out which crumbled under pressure recently from the Kmart downsizing. PillowTex was one of the last textile manufacturing companies in the United States, it is the final end of an era.

So how is NAFTA doing really? Well some is good, some is bad and some is ugly. The lessons learned by NAFTA could help us navigate some tricky trends we are now seeing with the US and China and India. Are we learning from our follies? Can we do better next time? Can we help bring China and India up without destroying our monetary flows in our own country? We cannot afford to sacrifice our strong middle class with bad trade policies, nor can we neglect our obligation to help the rest of the world move up for the betterment of all mankind. Please think about it.