NAFTA & Mexican Trucks

[Dr. Shane]

US House votes to end Mexican truck program

WASHINGTON, Sept 9 (Reuters) - The U.S. House of Representatives defied a White House veto threat on Tuesday by voting to end a controversial pilot program that gives long-haul commercial trucks from Mexico full access to U.S. highways.

The bill, approved 395-18, would reverse a decision by the Transportation Department to continue the program, which was begun last year under NAFTA, the North American Free Trade Agreement.

The Senate has yet to take action on the issue and unless Senate leaders can garner a veto-proof two-thirds vote against the program it appeared set to continue.

Still, the Mexican Embassy in Washington said it was "deeply concerned" about the House vote and welcomed the administration's intention to veto the measure.

"Mexico has fulfilled its NAFTA obligations and expects the U.S. do the same. Should the bill be enacted into law, the government of Mexico will consider taking all the appropriate actions, including remedies or countermeasures under the North American Free Trade Agreement," the embassy statement said.

Only a limited number of Mexican trucks have been granted full access because of U.S. political wrangling between congressional Democrats and the Bush administration.

Mexican trucks with U.S.-bound cargo have historically been confined to areas just over the border where they load their goods onto American trucks.

Labor unions, road safety and consumer groups have been the chief opponents to the new program. The administration extended it in August for up to two years even though the Democratic-led Congress was moving to shut it down.

The White House, in a statement earlier in the day warning that senior advisers would recommend a veto, said U.S. and Mexican officials had "effectively addressed" any safety concerns. The White House also said terminating the program would damage trade with Mexico as well as hurt U.S. trucking firms participating in the program.

[text from link]

[Dr. Shane]

Facts are that Mexican trucks have had less accidents per captia in the US than US trucks. Moreover, US trucks have made 1,000 more deliveries in Mexico under this agreement than Mexican trucks have made in the US.

[fccool]

Shane,

I don't really think the issue was of reason, but to show the "conspiracy nuts" that there are no plans to go beyond NAFTA. The problem with the "closed borders" view when it comes to the product market is the open borders of the financial markets. There are no protection against the artificial devaluation of currencies by means of perception... thus putting certain countries at trading disadvantage. Yet everyone is screaming bloody murder when a country dares to export cheap goods (based on their artificially evaluated currency and not the real value of the labor) ... because it destroys the overinflated lifestyle of the host country... which enjoys it mainly because of that advantage of the currency value.

I know much of the Americans are uncomfortable with corporations outsourcing and visa foreign labor here. Yet, the reality is that it is mainly due to the overinflated value of the currency that makes these phenomenons possible. Many economist call this dollar phenomenon a "magic economy". And it is magic, because magic is an illusion, although I know they don't see it that way. And right now we are living in times where the curtain is finally being pulled back.

[carolaa]

I found this to be interesting with regard to how U.S. trade agreements affect other countries:

http://citizen.typepad.com/eyesontrade/2008/10/taking-stock-of.html

Here is an excerpt that blames our illegal immigration problem directly on the U.S. and its unfair trade agreements:

"As nations have begun adopting NAFTA-WTO style policies, the displaced rural poor have had little choice but to emigrate to wealthy countries or join swelling urban workforces. As a recent exposé in the pro-NAFTA New Republic put it, “as cheap American foodstuffs flooded Mexico’s markets and as U.S. agribusiness moved in, 1.1 million small farmers – and 1.4 million other Mexicans dependent upon the farm sector – were driven out of work between 1993 and 2005. Wages dropped so precipitously that today the income of a farm laborer is one-third that of what it was before NAFTA. As jobs disappeared and wages sank, many of these rural Mexicans emigrated, swelling the ranks of the 12 million illegal immigrants living incognito and competing for low-wage jobs in the United States.” Indeed, a review of Mexican income growth rates, inequality, and manufacturing value-added shows that Mexico fared better before neoliberalism’s introduction relative to outcomes post-neoliberalism and post-NAFTA (see here and here).

"Developing countries that did not adopt the neoliberal policy package fared better. In sharp contrast, nations that chose their own economic mechanisms and policies through which to integrate into the world economy had more economic success. For instance, China, India, Malaysia, Vietnam, and Chile (and Argentina since 2002) have had some of the highest growth rates in the developing world over the past two decades – despite largely ignoring the directives of the WTO, IMF and World Bank. It remains to be seen what will occur if these countries implement the corporate globalization policy package. It is often claimed that the successful growth record of countries like Chile was based on the pursuit of NAFTA-WTO-like policies. But nothing could be farther from the truth: Chile’s sustained rapid economic growth was based on the liberal use of export promotion policies and subsidies that are now considered WTO-illegal."

[Dr. Shane]

These types of opinions are not in short supply. The fact is that since NAFTA has been adopted the cost of food in Mexico has become more affordable. Not something that Adventists would be real pleased with but Mexicans can now afford to eat more meat than their parents and grandparents ever were.

[carolaa]

Yes, of course, the food is more affordable. But their farmers are being put out of business. It's the same thing we did to Haiti, and look at where they are now.

Fortunately for the Mexicans, they live close enough to us that they can sneak over here and work jobs that our citizens won't do. But the Haitians are stuck eating dirt, literally.

This is largely why so many of the South American countries are banding together in opposition of our trade agreements.

[fccool]

Shane, if these trade agreements are so great for the natives, then why are they complaining and protesting all over the world?

[carolaa]

Yesterday was World Food Day. Today's Democracy Now! included an interview with Raj Patel, author of Stuffed and Starved: The Hidden Battle for the World Food System. He formerly worked for the World Bank, the World Trade Organization, and the United Nations. Here is an excerpt from the interview:

"As recently as last month, there was another—a food riot or food rebellion in Haiti, for example.

"Now, if you look at Haiti and see how—what it is that people are rioting over, people are rioting over grains of rice—I’m sorry, bags of rice that have the American flag on them and the words 'gift of the people of the United States.' And that should point out, I think, that underlying these food riots is a sort of long-term problem with trade agreements and with this aggressive pushing of agriculture as a weapon of US trade policy, and foreign policy, as well.

"So I think certainly we need food aid from—to be purchased within the region, and that means reforming the US food aid laws. The United States is the only country that insists on shipping US grain on US flag carriers to developing countries. No one else does that, because everyone realizes that when you do something like that, you wipe out local markets and wipe out local farmers. And food aid has long been used as a sort of aggressive weapon, in terms of making countries dependent on the United States." [bold supplied]

Link to the complete interview:

http://www.democracynow.org/2008/10/17/world_food_day_a_reminder_of

[Dr. Shane]

I can't disagree more with that. Let me share why free trade wipes out local markets. It is called cronyism. The local rice, bean, corn or sugar market is controlled by a small group of people - often times families. They charge an outrageous amount of money for their products. They give local politicians kick-backs so the politicians put high tariffs on competing products being imported. Yet these same people will sell their products abroad for much less than what they are getting at home. When politicians finally get enough pressure on them, by other nations that are importing their products, to negotiate a free-trade agreement, these same people that have been paying off the politicians and overcharging their fellow citizens, start crying that cheap imports are wiping them out and causing unemployment.

We need to understand the only way free-trade threatens local industries is because those local industries are not efficient. How is it possible that a Louisiana farmer's rice is cheaper to buy in Haiti than a Haitian farmer's rice is? It is possible only because the Louisiana uses more efficient methods of farming. So why should all the Haitians have to buy the more expensive rice from their own farmers when there can be cheaper US rice for them to buy?

[fccool]

I agree with above, yet it is not always the case. The honest global trade is a great thing for any country. Many countries do have comparative production advantages and could specialize and trade the excess. Yet, the local markets are lifeblood of any country. When you wipe out the local markets, you are at the mercy of the other countries to supply a certain need. The international economies can not exist without domestic ones.

A corporation has a comparative advantages over the entire economies of some countries. In fact, some corporations have bigger economies than countries. So it's pretty easy for a corporation to take advantage of the natural resources of a certain countries that come with deregulations stipulated under such free trade agreements.

Some economies and lifestyles can not be valued based on monetary value per capita. It would be absurd to do so to tribes in Amazon rain forest for example. They have their own sub cultures that are void of such notions, and local economies that are tribe based. So, while it may look like these people would be better off by getting a $1 a day for their work, it is simply not true... as it is an inapropriate comparison.... like apples and oranges.

The same with Mexican farmers and NAFTA. On one hand, let's say that US has a comparative advantage over Mexican corn farmers due to the superior technology and government subsidies. Yet, the agriculture sector of the US is less than 1% of the economy, and appropriately employs 2.2% of the population. In Mexico, agriculture is 5% of the GDP and employs 22% of the population.

What do you think happens to the 22% that make their living off the land when the industry is flooded with the cheaper corn? Do you think that these people are better off, if they can't buy the cheaper imported corn as they are loosing their jobs or have their wages cut as their employers try to compete? The minimum wages drop, and great percentage of population has to shift into survival mode by accepting just about anything.

[carolaa]

Well, yes, of course, we have more efficient methods of farming in the U.S. Not only that, but most of the farming here is done by large corporations that mass produce stuff cheaply. How can the small Haitian farmers possibly compete when we saturate their market with our cheaper products? Even our own small farmers are being driven out of the business. What we are doing is not fair. We are causing a situation where they are dependent on us for their food supply, because their local farmers have been driven out of business. We know this is what will happen, and we pressure them to agree, anyway. Then, after they are dependent on us for their food, they are in our pocket. So food is used by us for political gain.

[Dr. Shane]

Quote:

What do you think happens to the 22% that make their living off the land when the industry is flooded with the cheaper corn?

If it were really free trade Mexico could import their sugar-based ethanol into the US. They would then be able to grow sugar cane where corn was grown before and all the ethanol refining would create a boom in their economy.

[fccool]

Ethanol fuel is one of the most ridiculous things out there, and without governmental subsidies... it's dead in water. It has devastating effects on local food economy. The process of growing and converting food for ethanol is a total net energy loss process.

I don't have data about sugar cane, but here are some on production from corn:

An acre of U.S. corn yields about 7,110 pounds of corn for processing into 328 gallons of ethanol. But planting, growing and harvesting that much corn requires about 140 gallons of fossil fuels and costs $347 per acre. Thus, even before corn is converted to ethanol, the feedstock costs $1.05 per gallon of ethanol.

* The energy economics get worse at the processing plants, where the grain is crushed and fermented. As many as three distillation steps are needed to separate the 8 percent ethanol from the 92 percent water. Additional treatment and energy are required to produce the 99.8 percent pure ethanol for mixing with gasoline.

* Adding up the energy costs of corn production and its conversion to ethanol, 131,000 BTUs are needed to make 1 gallon of ethanol. One gallon of ethanol has an energy value of only 77,000 BTU. "Put another way", Pimentel says, "about 70 percent more energy is required to produce ethanol than the energy that actually is in ethanol. Every time you make 1 gallon of ethanol, there is a net energy loss of 54,000 BTU".

Ethanol from corn costs about $1.74 per gallon to produce, compared with about 95 cents to produce a gallon of gasoline. "That helps explain why fossil fuels-not ethanol-are used to produce ethanol", Pimentel says. "The growers and processors can’t afford to burn ethanol to make ethanol. U.S. drivers couldn’t afford it, either, if it weren’t for government subsidies to artificially lower the price".

If all the automobiles in the United States were fueled with 100 percent ethanol, a total of about 97 percent of U.S. land area would be needed to grow the corn feedstock. Corn would cover nearly the total land area of the United States.

I'm guessing that the rules in Mexico would not change, and these people would be better off by selling the sugar. US corporations get 1 billion subsidies for ethanol production. Ethanol is a loosing strategy to begin with. I just hope that sugar cane numbers are better. I'll do a bit of digging for myself.

EDIT: Sugar cane does offer a better results.

[carolaa]

Bill Clinton confesses, "We blew it." I didn't see that he mentioned NAFTA specifically - not surprisingly, since he pushed for it - but he's basically referring to our trade agreements.

"UNITED NATIONS – Former President Clinton told a U.N. gathering Thursday that the global food crisis shows 'we all blew it, including me,' by treating food crops 'like color TVs' instead of as a vital commodity for the world's poor."

Entire article:

http://news.yahoo.com/s/ap/20081023/ap_on_re_af/un_un_food_crisis

[Dr. Shane]

Free trade has made food cheaper, not more expensive. Clinton clearly identifies the problem in the article.

"Clinton criticized decades of policymaking by the World Bank, the International Monetary Fund and others, encouraged by the U.S., that pressured Africans in particular into dropping government subsidies for fertilizer, improved seed and other farm inputs as a requirement to get aid."

...Clinton also criticized the heavy U.S. reliance on corn to produce ethanol, which increased demand for the crop and helped drive up grain prices worldwide.

"If we're going to do biofuels, we ought to look at the more efficient kind," he said, referring, for example, to the jatropha shrub, a nonfood source that grows on land not suitable for grain.

Free trade in and of itself is not the problem. I don't think that is even what Clinton was implying. It appears to me he was talking about foreign aid.

[carolaa]

I thought this was also interesting:

"U.S. law, however, requires that almost all U.S. aid be American-grown food, which benefits U.S. farmers but undercuts local food crops."

[Dr. Shane]

Well that is in part opinion. If there is a shortage of food in the nation than US food wouldn't undercut local crops. However if US food creates a surplus of food in the country than it would undercut local food crops. It would also make food cheaper for the common person in that country.

[carolaa]

"Clinton criticized decades of policymaking by the World Bank, the International Monetary Fund and others, encouraged by the U.S., that pressured Africans in particular into dropping government subsidies for fertilizer, improved seed and other farm inputs as a requirement to get aid."

That's a great example of what we are doing around the world. In order to get our aid, they are not allowed to help themselves. Consequently, they are forced to become dependent on our aid, and then they can become our puppet. This is what people in the Central and South American countries are fighting against when they oppose our trade agreements. They are catching on to what we are doing, and they don't like it. I fear we are the stupid ones, because it will come back to bite us.

[Dr. Shane]

Apples and oranges. Free trade agreements and foreign aid are two different issues negotiated separately.

[carolaa]

Well that is in part opinion. If there is a shortage of food in the nation than US food wouldn't undercut local crops. However if US food creates a surplus of food in the country than it would undercut local food crops. It would also make food cheaper for the common person in that country.

And when it undercuts the local food crops, it drives the local farmers out of business, so the country is no longer self sufficient but is dependent on us (or others) for their food.

And we are fine with that, because then they are at our mercy. Except that when they try to come into our country so they can work and eat, all of a sudden, we don't like it so much.

[carolaa]

Apples and oranges. Free trade agreements and foreign aid are two different issues negotiated separately.

We do the same type of thing with our trade agreements.

[Dr. Shane]

NAFTA has done no such thing. The US gets a lot of its produce from Mexican farmers.

The point of Clinton's comments is that both he and President Bush agree on the issue of foreign trade. It is Congress, driven by interest groups, that is the problem. This is yet another reason to have public funding of federal campaigns.

[carolaa]

I believe NAFTA has done that to the Mexican corn farmers. Of course, our own small farmers have suffered from it, as well.

http://www.democracynow.org/2008/10/17/world_food_day_a_reminder_of

[carolaa]

That's the same link I posted previously, by the way, so just ignore it if you already read it.

[Dr. Shane]

NAFTA has been mutually beneficial to both Mexican and America farmers and is a good example of how free trade agreements should work. NAFTA does have some problems environmentally as it allows Mexican factories to be less environmental than American factories which gives Mexico an advantage at attracting American jobs.