Auto Industry: “We’re winning with NAFTA.” Seriously?

http://www.reuters.com/article/trade-nafta-autos/auto-industry-tells-trump-were-winning-with-nafta-idUSL2N1MZ028

The above-linked article reports on an effort to generate opposition to the Trump administration’s tough stance on the renegotiation of NAFTA.

Auto trade associations representing General Motors Co Toyota Motor Corp, Volkswagen AG, Hyundai Motor Co, Ford Motor Co and nearly every other major automaker, are part of the coalition dubbed “Driving American Jobs” and backing an advertising campaign to convince the White House and voters that the agreement has been crucial in boosting U.S. automotive sector production and jobs.

“We need you to tell your elected officials that you don’t change the game in the middle of a comeback. We’re winning with NAFTA,” the group said on its website.

OK, wait a minute, domestic auto manufacturers, especially GM and Chrysler.  First of all, you’re not “winning.”  You’re barely hanging on, thanks to a taxpayer-funded government bail-out a few years ago, made necessary by the fact that rotten trade deals drove you into bankruptcy.  What American jobs have come back since then were largely driven by the fact that the United Auto Workers, being one of the stakeholders in the bankruptcy process, demanded that it have some say in the location of new plants.  That’s GM.  And Chrysler?  Part of their pathetic “comeback” required them to be sold to Fiat, globally recognized as one of the shoddiest car-makers on earth.

Ford survived without a bailout, a point of pride for that company, but now finds itself struggling with a shortage of capital to modernize its product offerings.  Not a problem for GM and Chrysler who factored that need into the bailout.

No doubt, NAFTA has played a role in propping up the profitability of these companies.  But to suggest that that somehow is a “win” for American workers is ludicrous.

The campaign comes amid rising concern that the Trump administration could opt early next year to withdraw after giving six months notice, a move that could expose automakers to high tariffs who are building trucks in Mexico and impose new tariffs on parts and cars made throughout North America.

This coalition would like you to believe that automakers would have no “plan B” to counteract tariffs.  That they’d have no choice but to continue building in Mexico, forcing consumers to pay the tariffs.  Don’t be ridiculous.  Production would be moved back to the U.S. to avoid the tariffs and the impact on production costs would be largely offset by reductions in shipping an other supply chain costs.  The impact on consumers would be virtually zilch, and the impact on the American labor force would be an upward pressure on wages.

I don’t understand why the Trump administration is even wasting its time with trying to renegotiate this agreement, whose sole purpose was to boost Mexico’s economy, in line with the United Nations’ push to raise living standards in underdeveloped countries.  I suppose to be able to at least say, “we tried.”  But there’s nothing to negotiate.  Just impose the tariffs and watch them work their magic.

 

How’s Trump Doing?

With some slack time on a rainy day in the north woods, I thought I’d take a few moments to share some thoughts about Trump and his policies to date, as they relate to the economic problems wrought by worsening overpopulation: falling per capita consumption and the inevitable trade deficits caused by attempting to trade freely with badly overpopulated nations. So here goes:

Immigration:
Still no border wall. Other than that, I’ve been quite pleased with his other actions – the travel ban, the dramatic slowdown in visa processing, going after sanctuary cities, deporting illegal aliens, and so on. I also applaud him for his stance on the “dreamers,” those brought here as young children by their illegal alien parents. It may surprise you to learn that I’m actually in favor of allowing them to stay, even providing them a path to full citizenship. By all accounts, we’re talking about 800,000 people here. But it needs to be a one-time program. And it needs to be part of a bigger immigration reform that includes dramatic cuts in legal immigration – at least 50% (including student visas), and an end to the pyramid scheme of “family preferences” that, within a few generations, would make virtually every person on earth a candidate to become a permanent legal resident in the U.S. Trump is right to kick this issue back to congress and to demand action, but I don’t understand why he’s “selling it” so cheap. By demanding the above reforms, he could put an end to our out-of-control immigration. No senator or congressman would dare vote against it because all anyone would ever remember is that they voted against the “dreamer act” and in favor of deporting the dreamers.

Trade:
Here I have to say that I’m “hugely” disappointed in Trump’s failure to deliver on his promise to raise tariffs and/or border taxes in order to rebalance trade. But perhaps I’m impatient for action on this issue. His administration has taken some tough stances and is in the process of renegotiating NAFTA while also trying to reform the World Trade Organization. Last week it was revealed that the U.S. has been quietly blocking the filling of vacancies on the panel of appeals judges at the WTO and is now trying to assume a veto power if judges aren’t available. Reportedly, Trump told John Kelly, his new chief-of-staff, that he wants someone to bring him some tariffs. And most recently, when Boeing complained of Bombardier “dumping” planes on the U.S. market, the Trump administration promptly levied a 216% tariff on Bombardier planes. So there’s still reason for optimism.

Tax Reform:
Though this is the issue that excites the business community, the media and maybe even average Americans the most, for me it’s a non-issue unless a border tax is included as part of the reform. Dramatic cuts to corporate taxes, combined with some minimal cuts for average taxpayers, will blow a huge hole in the budget, just like it did when Reagan did the same thing back in the ‘80s. Sure, it’ll stimulate economic growth just a little, but no more than the amount of tax reductions that are plowed back into the economy. To expect a trillion dollar tax cut to generate economic growth of $4 trillion (the amount of growth it’d take to make it revenue-neutral) is a hocus-pocus fairy tale. And cutting corporate taxes that much will simply leave corporations with more money to invest in more job-killing manufacturing overseas. But all of that would change if a border tax were part of the package. Then it would truly be revenue-neutral and would fuel an explosion in economic growth. Trump is missing a huge opportunity by not insisting that a border tax be part of the package.

Paris Climate Accord:
Trump was 100% right to pull out of this agreement. Ask anyone and everyone the purpose of that agreement and every single person will tell you that its goal is to stop climate change. And every one of them would be wrong, because they haven’t read the stated mission of the accord, which is to merely slow climate change to a pace that would allow “sustainable development” to continue and, by the way, would essentially “tax” Americans to help fund that development in the rest of the world. “Sustainable development” is the very reason the world now finds itself in this global warming fix – because what world leaders thought was “sustainable” has proven not to be. So if global warming is slowed so that “sustainable development” can continue unabated, then every other problem associated with our exploding population – environmental and otherwise – will worsen, including mass extinction as habitat loss accelerates, more landfills, more trash in the ocean, more underground disposal of various hazardous wastes (including nuclear), and now a new one – the underground disposal of CO2 removed from exhaust streams. Where does it end? It needs to end now, and just maybe mother nature is doing us a favor by using climate change to wake us up. With all of that said, it disturbs me to hear that Trump may consider re-entering a renegotiated climate accord.

Repeal and replace “Obamacare”:
For me, this is another non-issue. The unaffordability of health care is a symptom of a deeper underlying problem, namely that every year the U.S. economy is drained of about $800 billion through the trade deficit, making everyone poorer and more dependent on deficit spending by the federal government to maintain an illusion of prosperity. Fix the trade deficit and the whole health care issue will go away.

So that’s it. Although I never really liked Donald Trump very much, and cringe at a lot of his “tweets” and some of the things he says, overall I’ve been pretty pleased with where the country is headed under his direction. But the trade/tariff/border tax issue is critical. If we don’t see action on reducing the trade deficit in manufactured goods, I fear that all will be lost. Like you told John Kelly, Mr. Trump, “we want tariffs and we want them now!”