Posted by: coastcontact | February 22, 2014

Free Trade Brings Creative Destruction

The Trans Pacific Partnership (TPP) is a brainchild of Barack Obama.  Consider this posting I made on February 22, 2014.

Creative destruction occurs when something new kills something older. A great example of this is personal computers.  Free Trade is another example.

NAFTA was President Bill Clinton’s naive plan to increase American trade while helping our neighbors.  It has not worked out as promised.

 

Mexico becoming a driving force in auto production

Mexico becoming a driving force in auto production

Honda Fit rolls off the assembly line at a new $800 million factory near Celaya, Mexico

Mexico, with its low labor costs, has been the beneficiary of the free trade agreement.  More products have entered the United   States from Mexico than ever before.    In 2013, according to our census bureau, $226 Million in products were exported and $280 Million were imported.  That number is on a path to increase dramatically over the next few years.  The reason is that Mexico has become the assembly floor for many products made in other countries.  The Los Angeles Times article titled “Mexico becoming a driving force in auto production” tells of the average hourly labor cost in their assembly plants of $8 versus an average hourly rate in the United States of $37.  These are the kinds of pay rates that drove American manufacturers to southern states in the USA.

What is the United States doing about this financial advantage?  Nothing!  Rather, the president of the United States, the Prime Minister of Canada, and the President of Mexico have just had meetings in Mexico at a town named Toluca (home of the Fiat 500 assembly plant), near Mexico City, discussing ways to further the NAFTA agreement.

Barack Obama claims to be concerned about the poorest in our nation and enhancing middle class opportunities.  How are more free trade agreements bringing jobs to the non-tech workers that assemble cars, refrigerators, and televisions?  They are not.  It’s creative destruction at work.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: