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Free Trade my ass!

25 April 2009

Mexico posted a small trade surplus of $160 million in March as a slide in imports of intermediate goods offset a big decline in exports, the national statistics agency said Thursday.  At the same time, the U.S. continues to lose trade, so the answer is… punish Mexico, right?

… a report from the Economic Policy Institute, a Washington think tank that studies economic issues that affect workers, argues that saving American automakers may instead end up saving — and even creating — Mexican jobs. The study, by the economist Robert E. Scott, points out that auto manufacturing has been slowly moving to Mexico since 1997. The trend accelerated last year, when Mexico’s share of North American auto production rose to almost 15 percent from 11 percent in 2007. The United States’ share fell to 67 percent from 70 percent, and Canada’s share dropped one percentage point to 18 percent.

Any bailout money from Congress, he argues, should come with strings attached that would keep jobs in the United States.

The conditions Mr. Scott proposes: G.M. and Chrysler (and Ford, if and when it asks for money) should face a limit on their investments in Mexico. The way to do that would be a cap on imports from Mexico as a share of sales. He also suggests a domestic content requirement for American-made cars that would halt the increase in parts imports from Mexico.

Finally, he argues that automakers and their suppliers should meet minimum labor standards — including allowing workers to form independent unions.

There is one catch: Nafta. The North American Free Trade Agreement is largely responsible for the industry’s move to Mexico. Before 1994, Detroit’s Mexican factories were largely geared to serving Mexico’s protected domestic market. Once the accord went into effect, autos and parts could move relatively freely across borders.

Mr. Scott’s proposals — capping imports of cars and halting the increase in parts — might run afoul of Nafta.

NAFTA was great, for the U.S., when it thought it could sell more than it bought, and  protect their farms and corporate agriculture.  But then carped that Mexican farmers were going where the jobs were, or finding alternative crops (like marijuna).  Now that it’s importing autos, it wants to create job protection programs (understandable) and shouldn’t be surprised if Mexican businesses start looking for alternative markets outside the United States.

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