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

October 25, 2017

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.


Are U.N. Goals Eliminating Poverty or Spreading It Around?

April 21, 2009

For those who wonder why the U.S. pursues policies that seem not to be in the best interest of the American people – trade policy foremost amongst them – you can find the answer in the the United Nations’ “The Millenium Development Goals Report.”

The U.N. web site provides the following paragraph as a background explanation of the Millenium Develpment Goals:

 The eight Millennium Development Goals (MDGs) – which range from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education, all by the target date of 2015 – form a blueprint agreed to by all the world’s countries and all the world’s leading development institutions. They have galvanized unprecedented efforts to meet the needs of the world’s poorest.

These goals were formally agreed to and adopted by the U.S. at the “Millenium Summit” meeting of the U.N. in September, 2000. 

In September 2000, building upon a decade of major United Nations conferences and summits, world leaders came together at United Nations Headquarters in New York to adopt the United Nations Millennium Declaration, committing their nations to a new global partnership to reduce extreme poverty and setting out a series of time-bound targets – with a deadline of 2015 – that have become known as the Millennium Development Goals.

There are eight goals set forth, each with various specific “targets” for achievement.  For the sake of brevity, I won’t list them all here.  You can find them at  The goals are on the right hand side in red.  Click each to read the goal and its associated targets. 

Most of these are laudable goals:  cutting poverty, improving education, reducing child mortality, fighting AIDS, halting environmental degradation and so on.  But it’s the final goal that may shed light on the genesis of our global economic collapse:

Goal 8:  Develop a Global Partnership for Development

Target 1:  Address the special needs of least developed countries, landlocked countries and small island developing states.

Target 2:  Develop further an open, rule-based, predictable, non-discriminatory trading and financial system.

Target 3:  Deal comprehensively with developing countries’ debt.

Work on these development goals began in the early 1990’s.  Following a decade during which the U.S. trade deficit had peaked at $151 billion in 1987, by 1991 it had fallen back to only $31 billion, a mere 0.5% of U.S. gross domestic product.  Even as late as 1997 it was only $108 billion or 1.3% of GDP.  Few imagined that our trade deficit could present much of a problem. 

Then, as now, economists believed that there were no limits to growth for which there were no technological solutions.  Every worker displaced by trade  in a developed country like the U.S. would find new work providing products and services that we couldn’t even imagine.  Economic development would grow the demand for products just as fast as it unleashed new workers on the global labor market.  Through gains in efficiency, recycling and substitution, resources shortages could be avoided indefinitely; and technology could mitigate all consequences for the environment.  And then, as now, economists refused to acknowledge the possibility of overpopulation and had no understanding of the relationship between population density and per capita consumption, nor its potential for accelerating unemployment and poverty.   Against this backdrop, world leaders naively believed that living standards could be elevated for all without dragging down the living standards in the developed world and without addressing the rapidly escalating problem of overpopulation. 

And so, eager to lead the world in doing its share, the U.S. began aggressively eliminating what trade barriers remained, even as the World Trade Organization enforced such barriers in favor of undeveloped and developing countries like China and India.  Disparities in population density between the U.S. and such nations created an enormous imbalance in global trade that sowed the seeds of the great economic collapse of 2008.  Only six years after the millenium summit, the U.S. trade deficit exploded to nearly $800 billion – more than 6% of our GDP.  American assets were sold off at a furious rate to finance the deficit, and a mountain of debt was built to mask the effects of declining incomes and net worth. 

Poverty has been alleviated to some degree in some developing nations, but now we see that it has come with a price.  Unemployment is soaring with the world now glutted with excess labor and productive capacity.  Instead of eliminating poverty, this grand plan of the U.N. is merely diluting it and spreading it around.  Read the one-page forward to the U.N.’s report (use the above link), and you’ll get a picture of high-minded goals that are now in complete disarray.  The U.N. is now calling for rich nations to intensify their efforts and accelerate the delivery of aid.  But the nation that was richest at the time that these goals were adopted – the U.S. – has now been completely drained of every penny of its wealth in support of these goals, necessitating that any additional aid be funded on the backs of taxpayers or by the outright printing of money.  But it can’t be sustained, and that reality is slowly sinking in.   Although the world still clings desperately to its economic fantasyland where obstacles to endless growth and development can be magically wished away, that dream is beginning to slip from its grasp.

While these millenium goals of the U.N. might be attainable in a world that was reasonably populated, they never had a chance of success in the real world where an enormous glut of labor lay dormant in grossly overpopulated nations like China and India.  Once unleashed on the global market, their nearly limitless productive capacity, combined with markets emaciated by over-crowding, has decimated the once-healthy economies of the developed world. 

Without addressing overpopulation, these millenium goals are doomed to failure.  And the field of economics should shoulder the lion’s share of the blame.  The time is long past for economists to drop their platitudes about the ingenuity of mankind and their childish refusal to consider the ramifications of population growth and start behaving like real scientists.  Start pondering what endless population growth does to an economy.  How will people live?  What will be the effect on the size of their homes, on their ability to own and operate vehicles, on their ability to enjoy recreational pastimes?  What will this do to per capita consumption?  To per capita employment?  If economists did begin asking such questions, they’d soon realize that decent living standards for all are impossible in a state of overpopulation.  A new economics would emerge.

Then will be the time for world leaders to reconvene and adopt a new set of goals, grounded in reality, freed of illogical assumptions and focused like a laser on the real issues that hold back human development.

Obama’s Opportunity to Kill Three Birds with One Stone

December 19, 2008

The inextricably linked issues of global warming and energy (eliminating our dependence on oil from the Middle East and Venezuela) have been elevated to national security issues by the Obama administration.  So, while consumers have welcomed the plunge in gas prices, they couldn’t have come at a worse time for this administration, for there is nothing that drives down the consumption of fossil fuels (the burning of which contributes directly to global warming) like high prices.  Without high prices, there is no profit potential to provide the motivation for a switch to more expensive alternative energy sources. 

So what is the Obama administration to do?  I see a unique opportunity for Obama to actually kill three birds with one stone here.  “Wait,” you’re thinking.  “You’ve only identified two birds – global warming and energy.”  Stick with me.  We’ll get to the third. 

The key is to drive fuel prices higher, restoring the impetus for improving energy efficiency and for converting to alternative energy sources, without hurting the consumer.  Here’s how that can be done.  It begins with imposing a large federal tax on fuels – oil, natural gas and coal.  Now I can just see your eyes rolling already, so hear me out.  Every penny of this tax should then be rebated to consumers in the form of a tax reduction of some kind – either a reduction in the tax rates or through a tax deduction or tax credit.  This tax reduction should be applied evenly to all individual taxpayers, but not to businesses.  (More on that later.) 

For example, let’s suppose that this tax drives the cost of gasoline back to $4 or $5 per gallon, and that a total of $600 billion is collected from this tax.  And let’s say that there are 150 million taxpayers.  Doing the math, each taxpayer would get back $4,000 at the end of the year.  If, on average, each taxpayer burns 2,000 gallons during  the year, and the tax added $2 per gallon to the price of gas, then that taxpayer comes out even. 

So how does this accomplish anything?  The tax rebate isn’t based upon how much you consume.  It’s based on total consumption by the American public.  So, if you do a better job than average of cutting your consumption, you’re going to come out ahead.  If you cut your consumption to 1,000 gallons for the year while the average remains 2,000 gallons, you’re going to come out ahead by $2,000 at tax time.  In other words, you have an incentive to slash your spending on gas.  At $4 per gallon, we’ve already seen how quickly people begin to use it more efficiently.  The tax rebate at the end of the year is just gravy.  Everyone is going to be highly motivated to cut their spending on gas, just as they were this past summer.  And now the profit potential is still there to motivate a switch to alternative energy sources. 

Why not extend the tax rebate to businesses?  Because, unlike consumers, businesses use vastly different quantities of fuel, depending on the nature of the business.  It’d be an accounting nightmare to try to keep them “whole” in terms of fuel cost vs. tax rebate.  Besides, their products are all consumed by individual taxpayers, so if the fuel tax collected from businesses is also rebated to individual taxpayers, then the latter are kept “whole” in terms of the tax rebate off-setting the higher cost of products.  In addition, with higher fuel costs and no tax rebate, businesses will be super-motivated to improve their energy efficiency. 

But, since businesses will have to add this fuel tax to the cost of their products, won’t this make American-made products uncompetitive with imports?  Ah, this is where the “third bird” comes in!  Imports would also be taxed at a rate that would eliminate this cost discrepancy.  But isn’t that a tariff that violates WTO (World Trade Organization) rules?  Yup!  And this is where it gets really good!  The global community, led by the UN, has been beating us over the head to come up with a plan to address global warming.  So, UN, here’s the plan.  Do you have a better one?  If not, then the global community, led by the UN, needs to sit down with the WTO and demand changes to trade rules that accommodate nations’ efforts to address global warming.  After all, everyone acknowledges that one of the keys to cutting fuel consumption and CO2 emissions is to produce more products locally.  And no one can argue that trade policy takes precedent over the need to fight global warming. 

In fact, that brings up another issue.  Billions of gallons of fuel are burned every year in ships delivering products all over the world.  That’s a lot of oil consumption and a lot of CO2 emissions.  It has to be factored into the equation by someone, in some way, because the cost of dealing with global warming is going to be astonomical.  A good way to account for this is to require each nation to include in its emissions the fuel burned by ships delivering imports, beginning with their point of origin.  What I’m saying is that imports should be taxed based upon the fuel that was burned to deliver them. 

For example, let’s suppose that a ship delivering cars from Japan burns about five million gallons of fuel and delivers 5,000 cars (fairly typical figures).  That fuel should be taxed at the same rate as fuel burned in the U.S.  Again, assuming that the tax adds $2 per gallon to the cost of fuel, then that delivery of cars should be assessed a tax of $10 million.  That would add $2,000 to the cost of each imported vehicle.  In fact, even the delivery of oil in tankers should be taxed in the same way, to mitigate the cost of dealing with the emissions from the oil burned in the ship’s engines.   

This means that imports would have to be taxed twice, or in two ways:  one tax to offset the higher cost of domestically produced products (unless the exporting nation has implemented a similar system of fuel taxes, making the imports equal in cost to domestic products), and a second to offset the cost of mitigating the carbon emissions that came from the ship delivering them.  Of course, all of these taxes or tariffs, whatever you choose to call them, would also be rebated to American taxpayers.  The goal is not to collect revenue, although some additional revenue could go a long way toward balancing the federal budget, but that’s a whole can of worms I won’t open here.  Rather, the goal is to provide incentive for cutting the use of fossil fuels and switching to alternative energy sources. 

The beauty of this is that the higher cost of imports would also go a long way toward restoring a balance of trade, an issue that many experts now agree is at the heart of the global economic melt-down. 

So, with one stone – a tax on fuels – the Obama administration could kill three birds:  reduce oil consumption and greenhouse gas emissions, and even restore a balance of trade, all with minimal impact on American consumers.  He can use the climate change issue to drive a wedge between the UN and the WTO and effect a badly-needed overhaul in WTO rules that would restore some balance to global trade.

UN Climate Conference Notes Role of Population Growth

December 17, 2008

This linked article offers one more glimmer of hope that the subject of overpopulation is getting more attention.  Although the article reports that the UN is unwilling to take on the issue of population growth as it grapples with global warming, experts in attendance at the UN climate conference in Poland recognize the role of population growth in worsening the problem and see a need to address it on a national level.

“Population is the unmentioned elephant in the living room when it comes to climate change,” said Bill Ryerson, president and founder of the Vermont-based Population Media Center.

“A lot of people say population pressure is a major driving force behind the increase in emissions, and that’s absolutely true,” the U.N.’s top climate official Yvo de Boer said.

“If we don’t address the population issue and population continues to grow the way it is, … we will fail to solve the climate crisis,” Ryerson said.

Brian O’Neill, a population expert with the National Center for Atmospheric Research, said there is substantial evidence showing a strong correlation between a country’s economic growth and its emissions.

Even if it doesn’t come up in Poznan, the Worldwatch Institute’s Robert Engelman said policies to slow population growth will eventually find their way into the climate toolbox for many countries.

“Population doesn’t need to be part (of) international negotiations on mitigation. You don’t have (to) say country X will cap its emissions and population,” he said.

“But countries will begin to see that a more rapidly rising population will make it hard for them to curb emissions,” said Engelman, the author of “More: Population, Nature and What Women Want.”

With the heavy emphasis that Obama has placed upon the issue of climate change, elevating it to a national security issue, how could it possibly escape his attention that it is exacerbated by population growth?  To hope for some kind of national policy aimed at stabilizing our population may be a stretch but, at the very least, one would hope that it will make Obama reluctant to liberalize immigration policy.

Ban Ki-moon: An Intellectual Lightweight?

June 3, 2008

I generally refrain from commenting on articles about resource shortages since my book, Five Short Blasts, is focused on an entirely different consequence of overpopulation – unemployment and poverty.  However, at this point it must be obvious to nearly everyone (except, perhaps, the most brain-washed of economists and the CEO’s of global corporations) that we’re reaching or have already exceeded some kind of limit here in terms of our planet’s ability to sustain us. 

It’s very sad that not even the U.N. Secretary General can recognize this fact and devote a few words to the need to stabilize our population, instead of calling for a 50% increase in food production over the next 28 years.  Is he such an intellectual lightweight that he can’t see the problem, or does he lack the courage to confront the misguided, evil pro-growth forces of the world?  I’m afraid that, with a very few exceptions, our world is devoid of leadership on the one issue where we need it the most.  This failure only condemns an ever-growing number of people to a miserable life and an early death.