American Workers’ Lives Risked in Support of Mexican Slave Labor

April 19, 2009

Here’s a consequence of U.S. trade policy that never gets reported, until now.  The linked article details how the lives of American white collar workers are put at risk every day as they are forced by their companies, profiting from slave labor wages and conditions in Mexican border town factories, to cross into that failed state’s drug war zone in order to supervise operations there. 

Nearly 3,500 white-collar workers from El Paso, Texas, cross a fortified border each workday, some of them wearing body armor as they enter the drug-torn city of Juarez, home to more than 100 parts factories that are a critical cog in the U.S. auto industry.

Rampant kidnappings, including the abduction of an executive for Southfield-based Lear, have unnerved residents on both sides of the border. Other executives have been targeted for robberies and extortion. One auto parts factory was invaded by gunmen who robbed employees.
Local officials insist the violence has not harmed U.S. workers or auto factories.
But Detroit auto executives in Juarez said they fear for their lives.
The article goes on to report that these American workers are forced to endure these conditions because the total cost of labor and benefits in such factories average $1.42 an hour. 

Mexico is a land rich in natural resources.  The U.S. imports as much oil from Mexico as it does from Saudi Arabia.  And, though twice as densely populated as the U.S., Mexico is far less densely populated than many wealthy nations, including virtually all of Europe.  By all rights, Mexico should be a wealthy country.  Yet, while the Saudis enjoy a very high standard of living, Mexicans endure abject poverty.  Slave wages persist there thanks to a corrput Mexican government and the complicity of the U.S., yielding to lobbying pressure by corporations who profiteer from these circumstances.

This is exactly the kind of situation that President Obama promised during his campaign to correct – fixing NAFTA to require labor standards and environmental protections.  Yet, since his election, he has had absolutely nothing to say publicly about the egregious conditions in Mexico that have spawned these border town slave labor camps, robbing us of manufacturing jobs and subjecting other American workers to intolerable conditions.  Instead of helping American manufacturing workers, he has threatened our auto industry with bankruptcy and has forced American workers to agree to more and more wage and benefit cuts in order to compete with conditions in Mexico. 

Perhaps there’s some sort of grand plan yet to unfold that will restore our manufacturing sector and the prospects for American workers but, so far, it’s awfully difficult to see any evidence of it.  For now, when it comes to Mexico, the only “hope we can believe in” may be that conditions along the Mexico border become so intolerable that American executives move their factories back north out of fear for their own safety.

Obama Auto Plan Comes Up Short

March 31, 2009

The linked article contains excerpts from Obama’s remarks about his administration’s plans for the auto industry.  The following is an outline of the key elements of that plan:

  • GM’s CEO Rick Wagoner has been ousted, replaced by COO Fritz Henderson.
  • GM gets 60 days to come up with a “better plan,” which involves shedding more brands, striking a deal with bondholders, and creating a “credible model” for “succeeding in this competitive global market.”
  • Chrysler gets 30 days to close a deal with Fiat.  (Fiat promises to build “new fuel-efficient cars and engines here in America.)
  • Fiat promises to repay American taxpayers before taking a majority ownership in Chrysler.
  • Both GM and Chrysler will go through some sort of government-sponsored bankruptcy, but not liquidation.
  • The government will back GM and Chrysler warranties in a bid to alleviate consumer concerns.
  • Acceleration of Recovery Act funds for government fleet purchases, though he didn’t say what percentage of these purchases would be American cars.  (Remember, the “buy American” provision of the Recovery Act had to be watered down to respect existing trade treaties, which includes Japan and Germany, but not Korea.)
  • Boosting funds to finance units like GMAC.
  • Sales tax deductions for the purchase of new cars (not necessarily American cars).
  • A “Director of Recovery for Auto Communities and Workers” to help affected communities.  No specifics about what this means.

The president’s plan misses entirely the real crux of the problem for the domestic auto industry – falling sales, most recently hammered by the deepening recession but in a much longer term slide due to an endless supply of foreign manufacturers getting free access to our market while we get nothing in return.  Even when confronted with blatant “dumping” by Japanese and German manufacturers, and by Mexico raising tariffs on American imports, the president has chosen to look the other way.  And after being crowded out of the small car market by a horde of imports, forcing the domestics to turn to the small truck and SUV market as its last bastion of profitability, the adminstration plans to force them out of that segment of the market as well, leaving it entirely to a swarm of imports.  (See Obama Backs Automakers, Fails to Act on Trade Problem.)  Obama speaks of a “competitive global market.”  There’s no such thing!  There’s only an American market open to global competition.  All other markets are either closed to American manufacturers or are so badly emaciated by over-crowding as to have the same effect. 

Experts have repeatedly warned that consumers will not buy autos from bankrupt auto companies.  Government backing of warranties won’t change this.  Small cars are predominantly purchased by young buyers and, among this demographic, it’s just not cool to drive American cars.  How much less will they buy them once they’ve been further stigmatized as loser-mobiles?

Regarding Chrysler, Obama just destroyed whatever bargaining power Chrysler may have had left in their negotiations with Fiat.  Fiat can now demand all of their assets while taking on none of the debt.  They will also build one or two models in the U.S. while using the deal with Chrysler to open the gates to a flood of imports from Italy.  Bye-bye more market share for domestic manufacturers. 

GM already planned to rid themselves of Hummer, Saturn and much of Pontiac.  But that’s not enough for Obama.  More brands have to go.  GMC is redundant with Chevy trucks, so that seems an obvious choice, except that GM makes a nice premium on GMC with little more effort than sticking a different badge on the truck.  So they can probably kiss that profit stream goodbye.  That leaves Chevy, Buick and Cadillac.  Will one or more of them have to go too?

When it comes to tax incentives to purchase new cars, 75% of the taxpayer money used to fund the program will go to boost foreign car sales.  So the net result will be to do more harm than good for domestic manufacturers. 

In the end, the plan is to reduce GM and Chrysler to bit players in a horribly glutted small car market, one small piece of a strategy to reduce our dependence on foreign oil.  But the crown jewel of that plan was the “cap and trade” item in Obama’s budget, the only thing that might motivate a switch to small cars by raising gas prices, already axed in the name of fiscal responsibility.  So we will be left with low gas prices fueling America’s appetite for SUVs and trucks, but now with only imports to choose from.

Four or eight years from now, when Obama is gone, the last vestige of the now-gutted domestic auto industry will be gleefully abandoned by his Republican replacement and held up as a shining example of how the free market purges itself of “inefficiency.”  Never mind that the market was never free or that millions of jobs have been purged with it.  Who cares?

With unemployment in Detroit at 22.5% and at 12.0% for Michigan as a whole, a state of depression has now been over-layed by a sense of hopelessness.  No one should take any perverse delight in the demise of the auto industry and the state of Michigan, because Michigan is a bellwether – the canary in the coal mine – for the American economy as a whole.

Parasites Fret Over Health of Host

February 19, 2009

I don’t like to use inflammatory or insulting rhetoric, so my apologies to the good people of Japan.  But Japan’s concern about the health of the U.S. automakers, as reported in the linked article, is perfectly analogous to parasites fretting over the health of their host. 

A healthy U.S. auto industry is vital for a sound U.S. economy and by extension for Japanese carmakers, a Tokyo-based auto lobby said, giving a tacit nod to the latest request for federal aid from ailing rivals in Detroit.

There is no one on earth more responsible for the sickening of the U.S. automakers than Japan, a nation incapable of consuming its own automotive productive capacity and who thus resorts to feeding on the American market.  They come to the trade table with an enormous glut of labor, hungry for work building cars for Americans, while offering nothing in return.  In fact, considering that our per capita trade deficit in manufactured goods with Japan is 4-1/2 times worse than that of China, there may be no one on earth who bears more responsibility for America’s overall economic collapse (and perhaps the global economic collapse) than Japanese automakers. 

Free trade cheerleaders loudly proclaim the many benefits of free trade and, when pressed for examples, the one they fall back upon in those situations where no others can be identified is “low prices for consumers.”  But when it comes to trade with Japan, one of the wealthiest nations on earth, whose cars have no price advantage over American models (in many cases they’re more expensive), free trade barkers can’t even claim this as a benefit. 

The U.S. has nothing to gain from trade with Japan and other nations with similar huge gluts of labor, badly overpopulated and desperate to prey on other economies to provide jobs for their surplus of workers.  That doesn’t mean that we should refuse to trade with them, but it does mean that tariffs must be employed to maintain a balance of trade in these situations. 

In many cases, free trade is a wonderful thing and the U.S. enjoys a very beneficial trade relationship with many nations.  But it’s important to recognize that trade in manufactured goods with overpopulated nations inevitably establishes a relationship in which the U.S. serves as host to a parasitic economy dependent on exports.  The time has come for the global community to deal with the problem of overpopulation instead of relying upon the U.S. market to sustain it.

The Domestic Auto Industry’s Problem? Dumb Trade Policy!

November 13, 2008

In my previous post, I laid out the reasons why the Big 3 are in trouble, and how to help them.  Briefly, their problems boil down to one thing:  dumb trade policy that gives away our domestic auto market for almost nothing in return. 

Perhaps some fresh, cold, hard data will help.  Trade data was released this morning (November 13th) for the month of September, 2008.  The following is the data for our major trade “partners” for motor vehicles and auto parts:

Country    Exports ($MM)    Imports ($MM)    Pop. Density (people/sq. mile)

Mexico             1,620                   3,903                            141

Germany              949                   1,565                            600

Japan                   155                   4,158                            878

Korea                    85                      692                            1,257

Canada            4,584                   4,673                                30

We import 2-1/2 times as many cars from Mexico as they import from us.  With Germany, it’s almost the same.  We import eight times as many cars from Korea as they import from us.  And we import almost 27 times as many vehicles from Japan as they buy from us!  For contrast, look at Canada and you’ll see almost perfect balance.  I’m showing you this data to make two points:

  1. Notice how well the data correlates with population density.  (The population density of the U.S. is 85 people per square mile.)  Korea is a relative newcomer to the auto market (compared to Germany and Japan), so we can expect the imbalance with them to worsen dramatically as time goes on.  Clearly, free trade with grossly overpopulated nations is a sure-fire loser.  (The data for Canada is provided for contrast.  Notice that our trade in motor vehicles with Canada is almost perfectly balanced.)
  2. Is it any wonder our domestic auto makers are having trouble?  We gave away over half of our market and got virtually nothing in return from the likes of Japan and Korea.  That would be acceptable if they made up for this imbalance by importing more of some other category of product, but they don’t.  Our overall trade imbalance with Japan is enormous, second only to China for manufactured products and, while our trade deficit with Korea is relatively smaller, it’s growing fast. 

Folks, this is just idiotic trade policy.  The word “trade” is defined by Webster’s as a mutually beneficial exchange.  That means that each party gets something in return for what they are trading.  What are we getting from these countries?  In some cases, like Mexico and Germany, we are not getting enough.  In the case of Japan and Korea, we’re getting virtually nothing.  This isn’t trade; it’s global welfare.  It’s a huge lie being perpetrated on the American work force, telling us to compete harder and be more productive, all the while knowing that we don’t have a chance.  They’re not going to buy our products.  They’re not stupid.  They have far too many idle workers in their bloated labor forces to be kept occupied to keep their societies from collapsing.  They’re playing Americans for fools.

Will we ever wake up to what’s being done to us – to our country?  There was a time when Americans stood up for themselves and fought when they were being used and taken advantage of.  Is that time past? Have we evolved into a nation of sheep?  Like dumb mules, we take our beating and just keep trudging along with our heads down.  Frankly, the whole situation makes me sick.