Don’t underestimate Mexico’s economic influence on the USA

March 22, 2009 at 6:34 pm Leave a comment

I know that Americans think we live in a first-world nation, and Mexico is a third-world nation, so my title may seem laughable at first… but reality shows a different story.

To begin with, the world’s richest man, Carlos Slim, is Mexican.  The rankings may fluctuate, but he is definitely up there with Bill Gates and the owner of Ikea.  The NY Times, the nation’s newspaper of record, just got bought by him.

You like your cheap food and goods?  Thank Mexico for that also.  Mexicans are an indispensable part of our economy.  Now they may add to our economic woes by showing exactly how important they are.

IN JANUARY Mexico’s president, Felipe Calderón, became the only foreign leader to meet Barack Obama between his election and his inauguration. Their long lunch was a success. Mr Obama said afterwards that he would be “ready on day one to build a stronger relationship with Mexico.”Just two months later, the honeymoon has soured somewhat. Mr Calderón has taken to lambasting American officials for allowing the illegal drug trade between the two countries to flourish, and to criticising the American media’s coverage of Mexico’s drug-related violence. Now a provision inserted into the Omnibus Appropriations Bill signed into law by Mr Obama has scrapped a pilot programme that allowed a small number of Mexican trucking companies to carry cargoes north of the border—as NAFTA requires.

Mexico’s response was swift. On March 18th it imposed tariffs of up to 45% on 90 American agricultural and industrial imports, ranging from strawberries and wine to cordless telephones. The list was carefully chosen to avoid pushing up prices of staples in Mexico while hitting goods that are important exports for a range of American states. That way, it could have maximum political effect north of the border.

via Mexico, NAFTA and protectionist pressures | Don’t keep on trucking | The Economist.

I think that Americans need to stop with the “we are almighty and don’t need anyone else” mentality.  Everyday more and more of America is being owned by foreigners… we don’t even own the wars we fight anymore.

This gets more interesting.  The Teamsters tried to use “good ol’ American” quality as an argument to keep Mexican truckers out of the US, in violation of NAFTA.

An American court rejected these arguments. So did a NAFTA dispute-settlement panel, which ruled in 2001 that the United States was violating the agreement and gave Mexico the right to impose retaliatory tariffs. Mexico chose not to do so, to give the United States a chance to honour its commitment. The Bush administration tried, but was thwarted when Congress approved a measure setting 22 new safety standards for Mexican trucks.

To try to break this stalemate in 2007 the Bush administration set up the pilot programme, under which trucks from 100 transport firms in each country were allowed to cross the border. Opponents in Congress slipped a provision delaying this into an unrelated bill. This was hailed by James P. Hoffa (son of Jimmy), the Teamsters’ president, as a victory in “the battle to keep our borders closed”. But the pilot scheme eventually went ahead.

The Teamsters’ safety argument looks spurious. Mexican transport firms have invested in new trucks and trained their drivers to meet the safety requirements under the pilot scheme. A study commissioned by America’s Department of Transportation, which tracked Mexican trucks operating north of the border in the first year of the programme, found that these trucks clocked up far fewer safety violations than their American counterparts.

The Teamsters’ victory means that most Mexican goods going north will continue to have to be unloaded at the border, reloaded for the short hop across it, then loaded again onto an American truck. This amounts to what Mexicans call a “trucking tax”. And since the short-haul lorries tend to be older gas-guzzlers, it is environmentally unfriendly, points out Barbara Kotschwar, a trade specialist at Georgetown University in Washington, DC. No such restrictions apply to Canadian lorries.

The last line is interesting because of the underlying racism built into these laws.  But not only is the status quo unfair, and a “victory” for the Teamsters, we all will end up suffering the consequences as a result of the environmental impact it is having.

Free trade?  You have evidence that Mexican truckers are just as good, or even better than American truckers, and still the best does not always win…

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