July 11, 2011. Mexico City. President Obama and Mexican President Felipe Calderon signed a deal that will officially, temporarily at least, fulfill a long argued portion of NAFTA. The North American Free Trade Agreement was signed into law in 1994. At the time, both partys leadership championed the trade deal, while a unique assortment of social activists Jesse Jackson, Pat Buchanan, Ross Perot, the AFL CIO and others claimed it would destroy millions of American jobs. Today, experts still argue over the benefits, or harm, from NAFTA. Depending on which side you believe, this new agreement is either good news or bad news.
The agreement President Obama signed with Mexican President Calderon will essentially end a mini trade war. As early as 1995, the Clinton administration closed the gates to Mexican truckers citing safety concerns. In response, Mexico began illegally over-taxing many American products, thus making them too expensive to compete in Mexico alongside Mexican products.
This new agreement will not only end the decade-long dispute, but it will reap immediate profits to those who stand to benefit. In Mexico, its a win/win situation. The government wont lose any additional tax revenue by eliminating the tariffs on American goods, as they never collected any to begin with. The whole exercise was to punish American companies. US products are still too expensive to compete there. Except in cases where American companies have a uniquely addictive product or a virtual monopoly, like Pepsico or Smith and Wesson, American companies wont see any new sales in Mexico. On the plus side, Mexico will have fulfilled a promise to tens of thousands of Mexican truckers who see Americas roadways as new opportunities and more income.
Here in America, the situation is more of a lose/win/lose scenario. As early as next month, thousands of American truckers will lose their jobs while the American companies they work for will choose to hire their Mexican counterparts at a much lower pay scale. And that brings us to the only winners here in the US. American companies of all sizes, except trucking companies, hope to see additional profits two ways.
First, their shipping costs will be lower because they wont have to hire a US trucking company to pick up the Mexican goods they sell here in the US at the border and bring them the rest of the way to an inland city like Boise or Buffalo. This new agreement allows Mexican truckers to make their deliveries regardless of where they are in the continental US. Until now, Mexican truckers werent allowed to operate on Americas open roads due to safety concerns over our differing language and traffic laws.
The second benefit these American companies hope to see is additional sales in Mexico. Wall Street analysts calculate that these products should cost roughly 20 percent less than they did until now. Critics argue that it isnt enough to make American products competitive against Mexican products that are half or one-third their price.
The only losers in the deal signed by President Obama and supported by Republicans appear to be the users of Americas roadways, especially our nations truckers the Teamsters. Thousands of Teamsters and independent truckers alike will be out of work. All the one and two day trips from the Mexican border throughout America, transporting Mexican goods to their US destinations, will now be made by Mexican truckers who for the first time, wont have to drop off their cargo at the border and head back.
More importantly, and often overlooked in the world of business and high finance, are the effects this agreement will have on everyday American motorists. Heres one example.
Here in Illinois, our last governor was sentenced to prison for actions he committed while serving as Secretary of State. No, not Democrat Blago, our Republican governor before him that also went to prison, George Ryan. Before Blagojevich got caught selling our US Senate seat, then Secretary of State George Ryan was caught selling Commercial Drivers Licenses to foreigners who couldnt read or speak English and had no knowledge of the rules of the road.
One of Ryans customers went on to kill the entire family of a minister and his wife. Six children in all, burned to death in a fiery interstate collision caused by a foreign truck driver who wasnt prepared or equipped to handle the task. Many fear that horrible instance will now be repeated a thousand times over.
Perhaps that tragic result of Illinois corruption is the reason fierce opposition has arisen to President Obamas Mexican trade deal, and the reason its emanating from his home state of Illinois.
Immediately after the President signed the agreement, Rep. Dan Lipinski (D-IL) co-sponsored a new law that would cut-off the funds the Department of Transportation needs to implement the deal. Following right behind Congressman Lipinski were Americas Teamsters.
Opening the border to dangerous trucks at a time of high unemployment and rampant drug violence is a shameful abandonment of the Department of Transportations duty to protect American citizens from harm and to spend American tax dollars responsibly said Teamster President James Hoffa.
Countering any safety concerns, the White House points out specific protections within the agreement. In order to drive inside the US, Mexican trucking companies will be required to perform background checks on their drivers. They will also have to install electronic surveillance equipment to insure drivers arent driving too many hours in violation of DOT rules. Most importantly, Mexican drivers will have to pass an oral exam on US traffic laws, in English. Lastly, drivers would have to submit to an inspection of their trucks at the border and purchase US auto insurance.
Critics argue that all those things must be done and verified on the Mexican side of the border. With a government that appears to be losing a civil war to Mexican drug cartels, Americans are skeptical of any of those requirements being enforced. Critics also condemn the fact that the money to pay for all the monitoring and inspections done on the Mexican side of the border is to be paid for by the US taxpayers through Federal gasoline taxes.
Rep. Lipinski finds that fact is most persuasive argument among his constituents. It takes money from the highway trust fund and purchases these electronic on-board recorders for the Mexican trucks. We need the money for our own roads. When I tell people that their tax money will be paying for equipment on Mexican trucks, they cant believe that this would be happening.
It appears America has once again given away tens of thousands of jobs in one single trade deal. And again, it looks like the US taxpayers are paying another country to take them. While critics of NAFTA and this new trucking deal are already rallying their troops to fight it, things dont appear to be too happy on the Mexican side either.
The head of the Mexican Trucking Association wasnt optimistic. Citing a history of Americas Democratic leaders siding with organized labor, as well as the practices of organized labor itself, Jose Refugio Munoz, who represents 8,000 Mexican trucking companies stated his skepticism. Munoz was quoted by Dow Jones News Service as saying, We see the agreement as a good-faith effort, as a type of experiment. Its a start, on paper, but we have no illusions that this is a definitive program. We view it with skepticism.
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