The threat of total abandonment of NAFTA took on a second front today as Canada’s biggest private-sector union said NAFTA should be scrapped if Mexico cannot agree to better labor standards.
Please consider Sharp Differences Over Labor Surface at NAFTA Talks in Mexico.
Tensions over sharp differences in pay between Mexican workers and their Canadian and U.S. counterparts surfaced on Sunday as negotiators discussed labor market rules in talks to overhaul the North American Free Trade Agreement.
Canada’s biggest private-sector union said NAFTA should be scrapped if Mexico cannot agree to better labor standards, clashing with Mexican business leaders who argued that workers rights were a matter for each country to resolve internally.
Mexican political and corporate leaders firmly resist demands to bring wages into line with U.S. and Canadian levels, arguing the big cost advantage the country enjoys over richer peers should decrease as economic development advances.
Labor union leaders in the two wealthier nations say laxer labor standards and lower pay in Mexico have swelled corporate profits at the expense of Canadian and U.S. workers, making resolution of the issue a major battleground of the NAFTA talks.
Jerry Dias, national president of Canadian union Unifor, said NAFTA had been a “lousy trade agreement for working-class people” and that the union was pushing his government to walk away from the talks if it could not secure them a better deal.
“If labor standards aren’t a part of a trade deal, then there shouldn’t be a trade deal,” Dias told reporters in Mexico City on the sidelines of a second round of negotiations to update the 1994 trade agreement among the three countries.
Bosco de la Vega, head of Mexican farm lobby, the National Agricultural Council, said more trade, not intervention in labor markets, was the best way for the region to grow economically.
“Mexico can’t interfere in the labor market issue in the United States and Canada. We ask the same: that they don’t interfere in these matters,” he told reporters at the talks.
Moral Outrage Over Free Trade
Are bad jobs at bad wages better than no jobs at all? Should the US demand third world economies pay “living wages”?
If so, and if countries don’t oblige, should the US impose tariffs so the US does not lose jobs to such countries?
This is what I think…
Moral outrage is common among the opponents of globalization–of the transfer of technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive Third World exports. These critics take it as a given that anyone with a good word for this process is naive or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and abroad.
But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.
Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say “inevitably” because their employers are not in business for their (or their workers’) health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives.
And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. More importantly, however, the growth of manufacturing–and of the penumbra of other jobs that the new export sector creates–has a ripple effect throughout the economy. The pressure on the land becomes less intense, so rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories start to compete with each other for workers, and urban wages also begin to rise. Where the process has gone on long enough–say, in South Korea or Taiwan–average wages start to approach what an American teen-ager can earn at McDonald’s. And eventually people are no longer eager to live on garbage dumps.
The benefits of export-led economic growth to the mass of people in the newly industrializing economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still malnourished–but in 1975, the fraction was more than half. Similar improvements can be seen throughout the Pacific Rim, and even in places like Bangladesh.
Why, then, the outrage of my correspondents? Why does the image of an Indonesian sewing sneakers for 60 cents an hour evoke so much more feeling than the image of another Indonesian earning the equivalent of 30 cents an hour trying to feed his family on a tiny plot of land–or of a Filipino scavenging on a garbage heap?
The main answer, I think, is a sort of fastidiousness. Unlike the starving subsistence farmer, the women and children in the sneaker factory are working at slave wages for our benefit–and this makes us feel unclean. And so there are self-righteous demands for international labor standards: We should not, the opponents of globalization insist, be willing to buy those sneakers and shirts unless the people who make them receive decent wages and work under decent conditions.
This sounds only fair–but is it? Let’s think through the consequences.
First of all, even if we could assure the workers in Third World export industries of higher wages and better working conditions, this would do nothing for the peasants, day laborers, scavengers, and so on who make up the bulk of these countries’ populations. At best, forcing developing countries to adhere to our labor standards would create a privileged labor aristocracy, leaving the poor majority no better off.
And it might not even do that. The advantages of established First World industries are still formidable. The only reason developing countries have been able to compete with those industries is their ability to offer employers cheap labor. Deny them that ability, and you might well deny them the prospect of continuing industrial growth, even reverse the growth that has been achieved. And since export-oriented growth, for all its injustice, has been a huge boon for the workers in those nations, anything that curtails that growth is very much against their interests. A policy of good jobs in principle, but no jobs in practice, might assuage our consciences, but it is no favor to its alleged beneficiaries.
You may say that the wretched of the earth should not be forced to serve as hewers of wood, drawers of water, and sewers of sneakers for the affluent. But what is the alternative? Should they be helped with foreign aid?
And as long as you have no realistic alternative to industrialization based on low wages, to oppose it means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard–that is, the fact that you don’t like the idea of workers being paid a pittance to supply rich Westerners with fashion items.
In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.
Purposeful Plagiarism
I need to point out that everything above following “This is what I think…” was not written by me (but it does reflect my exact beliefs).
Believe it or not, Paul Krugman wrote that, and here is the link: In Praise of Cheap Labor.
Krugman wrote that before he lost his mind.
Fair Trade is Unfair
The unions howl they want “fair trade”. Fair to whom? The answer is fair to their self-interests, damn the enormous costs to everyone else.
Tariffs will not bring jobs back to the US, at least jobs by living, breathing human beings.
All tariffs will do is slow global trade and raise costs on everyone.
Those looking for someone to blame for income inequality and low real wages, should not look at globalization, but rather the Fed (central banks in general), insisting on rising prices in a technological deflationary world.
Repetitive asset bubbles and the demise of the middle class are the direct results.
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An ideal trade agreement can fit on a napkin: Effective immediately, all tariffs and all subsidies, on all goods and services ends today.
Mike “Mish” Shedlock
Mike “Mish” Shedlock
I would agree 100% with you Mish but is this the same War now or has it changed?
There is the new element of AI and Robotisation. Those poor workers will still not be able to compete with automated factories in the West nor Western workers take the jobs. No one ends up satisfied except for the availability of cheaper goods.
Low cost repetitive work can be sited near the end market and a major cost element will not be labour but tax, infrastructure and reliable electricity/communication systems.
Look at the sneaker trade being brought back into Europe.
It’s going the same way for Agriculture.
If developing nation living standards are the rise there has to be extra thought now. It is all changing, rapidly.
Labour cost competition will be swapped for tax, infrastructure, rate of deployment (planning hurdle) competition and the workers everywhere are a side-show.
WORKERS ARE BECOMING A SIDE-SHOW NO MATTER HOW CHEAP.
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“There is the new element of AI and Robotisation.”
Yup! AI and Robotisation will now do what globalisation did in terms of eviscarating middle class during that last 3 decades. I still do not understand, with people rendered jobless, where is the demand going to come from. Given the demand destruction that could happen (since not many will have a job) and that Ben “trickle down” Bernanke’s wealth effect has proved to be all nonsense (given the imbecile he is, after his subprime has been contained, it was to be expected) one can only wonder what the future holds for people.
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Great article, not many people are able to see the whole chain of events which leads to people getting a better life over time. I am from Norway and my father was a sailor when he was young (he is born in early 1930) and he was away working for up to 2 years without going home much like other sailors from poorer countries today. As one of the riches countries in the world now not many young people are aware of much worse off we were 70 years ago.
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Yes, Mexico has about 40% of the population of the U.S. and about 5% of its GDP. Where. pray tell. does this money come from to pay workers U.S. wages?
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What is the productivity in the export industries, by industry?
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Mish — one of the issues I have with free tsade is fraud. Remember the melanin dog food?
Well, all our Walmart/Amazon/Food Store Organic food from China is rubberstamped — as the trade law requires — by Nondescript Quality Reassurance… but being from China, you don’t know if that’s organic cadmium, melanin, and arsenic in your food. Here in America, cadmium is considered not even food. In China, water from the yellow river, high in Arsenic, might not make other toxic pesticides even necessary.
Point being, all our standards lose their entire meaning. You don’t know what you’re buying any more.
And that is a problem I have with these free trade agreements.
Indeed, often the FTAs prohibit even honest labelling, because it might disadvantage frauds.
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No one ever said get rid of product safety
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I agree with your stand -and Krugman as well – here. My opposition to these Free trade deals is simply that there can be no free trade deals. It’s all a matter of getting advantage over the other parties’ resources.
Nations like the USA are well endowed with the skills to drain resources or distribute exports to other trade partners. Corporations want ISDS clauses every time not just to protect themselves but also to exploit. Then we hear about “Confessions of an economic hit man” and the damage they can do with the IMF and World Bank as partners in grime.
Also exports are costs while imports are benefits. The smart guys know this and act accordingly. So China’s labour and resources end up in the USA. The USA pays with writing up numbers on Fed reserve accounts. so they get the goods and services with almost no effort.
So one can be sure that trade deals will continue to be proffered as long as “target” nations remain ignorant. Even nations one would think sophisticated, like Australia, can be targets, and have been.
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“Repetitive asset bubbles and the demise of the middle class are the direct results.”
While repetitive asset bubbles is due to the Fed, part of the reason for demise of middle class has to be globalization due to its ability to substitute high cost labor of the importing country with low cost labor from the exporting country. This naturally leads to job losses in the importing country. Over a period of time it eviscerates the middle class in the importing country. After a few decades it will lead to protectionism, as people of the importing country realize they are done for and will rise up.
The Fed is responsible only to the extent that it allows this game (of using debt for the loss of income) by reducing interest rate, pulling demand forward and encouraging debt. The gaming can go on for decades before you suddenly find you have a demand seizure in the system.
In short, globalization, while it uplifts the living standards of the exporting country has its own perils for the importing country and it can take decades to manifest, when things might turn ugly. I think we are pretty close to that point now.
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Yes. I’m thinking,but I don’t know for sure, that that’s the exact deal Nixon and Kissinger struck with the Chinese in 1972 after the gold window was slammed shut. We’ll trade you our manufacturing base if you’ll use all those surplus dollars to finance our deficits. Sweet deal for everybody until the only jobs left here are food service jobs and dementia care jobs made possible from eating the food the food servers provide.
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There is a technical problem underlying this discussion which always crops up when comparing countries. In the US a lettuce is worth $2 but in Mozambique it is worth 2¢. There is no arbitrage because lettuce doesn’t travel well. Any comparison of storm damages, hotel costs, or labour costs between the US and Bangladesh is moot. Nor do ppp comparisons help very much. How to compare a rural village in Africa where people seldom use money, pay no taxes, have no housing and utility costs, let alone child-care, health insurance, etc.?
Even within Canada and the US there is a huge difference between getting by on $12/hour in rural Mississippi or New York city. Cdn wages have dropped by more than a third between 2008 and today, just on the basis of currency trade. People keep making this mistake:
–Storms cause hardly any dollar damage in poor countries
–Nobody is poor [here] because the WHO says $2/day is the poverty line, and you would be dead if you spent that little.
–Africans think the streets are paved with gold in Europe, not realizing the rent and other costs are also stratospheric
–People get all weepy when they hear people are only making $2000/year somewhere (they should be thinking on taking a vacation there for very little exchanged money)
–People look at Europe trend growth and conclude that it is very small or negative, having forgotten that they are thinking in dollar equivalents instead of Euro’s, and forgetting that the Euro went from $1.47 to $1.03.
Comparisons are always very limited exercises. Negotiating pay in other regions/countries is illiterate. [And, by the way, I am not in favour of unfettered global wage arbitrage.]
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Depends on the product. New Balance sneakers are made in my back yard here in The Merrimack Valley. I only buy New Balance, not just because they are made here, but they are in fact a good product at a fair price. It can be done.
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Yes Duncan, and that’s how we used to live (and were happy). Quality products that were worn and repaired until no longer serviceable. My father had one pair of Oxford style shoes that were polished weekly. Children had a pair of runners and a pair of dress shoes.–and my father was a physician. Now we have a closet full of shoes and think we’re doing great while “our neighbour” is now working for minimum wage at Walmart.
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The error in the thought outline by Krugman is that history proves that our efforts to force Capitalism and wealth transfer on emerging economies in order to explicitly improve their lot in life, reduce immigration to our nation, and increase their wealth in order to encourage them to buy our higher value more complex goods, has failed pretty consistently.
Nafta did little to address economic imbalances, with the vast majority of increased wealth ending up in the hands of the already wealthy, the connected, the elite. It did virtually nothing to discourage immigration to the US. And the wealth it transferred did little to increase trade from the US to Mexico.
Our best strategy has always been to promote Capitalism, Free Markets, and Democracy. Starting from right here at home, making this nation a magnet for people wanting to make money and improve their lot in life. Or for companies concerned about the protections of private property in foreign nations with unstable or corrupt governments.
Certainly we should want our sphere to be as stable and productive as possible, but we can’t force Free Markets and Capitalism (or ensure that wealth trickles down to the pooreest) on others just as we can’t force Democracy.
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It’s easy to undercut the other guy if you can dump your toxic waste in the nearest river, pollute and strip mine to your heart’s delight,, don’t have to pay worker’s comp insurance, social security taxes, etc.
Globalization has made a selected few fabulously rich at the expense of the many.
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I doubt the South Korean median wages are on the level of the MacDonald’s workers’ wages:
https://en.wikipedia.org/wiki/List_of_countries_by_average_wage
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south korean factory workers wages are about 80% of US factory worker wages
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Very Krugmanesque. I have no issue with export driven growth by poor countries. As long as the US doesn’t run a trade deficit in manufactured goods. That just makes sure that they are buyers, not just sellers.
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Mish,
Slave wages are a misnomer. Using your logic, paying people $20 an hour to change tires in Aspen Colorado because they can get no one to do the job would make the guy in Georgia doing the same job for $8 an hour working for slave wages. Those people working for 60 cents are happy to have a job and making a living wage in India. Another example of trying to impose American standards on the rest of the world.
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Good article. I agree just hate term slave wages because such a thing does not exist.
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You misread my conscience, Mish. The low wage workers in Mexico will not see a penny until their narco state overlords have been rendered fabulously wealthy. One would hope that by enforcing, or rather, leaning in favor, of slightly higher wages — as the workers themselves are not able to do, we would broaden distribution, thus improving the health of Mexico, and, as a byproduct, enabling a few more jobs in the US and Canada.
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The Mexican “Narco state” was caused by the US. We should scrap our drug laws. The biggest beneficiaries of the war on drugs are the war lords and public union prison guards.
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How long before California and Washington start questioning free trade with low wage Tennessee?
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Or dudes in the countryside starts bitching that draft animals are taking “their” pulling-a-plow job, while “working for a few fistfuls of grain a day…..”
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While reading “what you / Krugman think” my first thought was, so when did Mish move to an Ivory tower and start thinking like a person that only has thoeries and no practical experience?
Since we are theorizing, if we account for the added product costs associated with EPA and labor standards, wouldn’t that produce the same “benefit” as sanctions? Sanctions are intended to make life so horrible for citizens that they have nothing left to lose and lose it in the form of a revolution. If govt’s are exploiting their people, shouldn’t people get a push of encouragement to get on with overthrowing their govt? God knows our citizens need a push.
By imposing excessive govt-related costs, which includes Obumacare, and high and unstable taxes that force businesses overseas, our govt is doing exactly that – fomenting the civil unrest that will produce another civil war, which are always economic based. Our unconstitutional progressive tax system is also a capital impediment, but that’s a topic for another time. Think about it, if your landlord (local govt) had the right to arbitrarily raise your rent (property tax) if you got a raise, would you sign the lease (buy the house)?
The theory that Krugman and other establishment hacks never put forth, because it’s based on actual historic facts and requires flushing themselves down the toilet, is growing govt faster than incomes / private sector is absolutely unsustainable.
Rising import cost is not a problem if govt-related costs are reduced and wages rise because businesses find an advantage to move manufacturing back to the US. The other key requirement is equal enforcement of the rule of law, which also requires flushing career politicians and imposing short term-limits to reduce the ROI for lobbiest bribes.
BTW, you could eliminate the Fed tomorrow and our problems would continue, since the problems are rooted in govt fraud, corruption, and abuse. However, if you eliminate the career politician, we reduce the economy-killing actions taken by self-interested politicians that will do anything to maintain their perky lifestyle, which includes not managing the Fed who sells their unsustainable debt-based promises (lies).
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You are correct on this point: the problems would not go away if we eliminated the Fed, because we still have fractional reserve lending. Need to get rid of both. Also need to get rid of government picking winners and losers, public unions, and lots of other things. I have commented on all of those. The Fed is a good start. So would be eliminating FRL.
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The problem with the banks is transactional banking / trading, enabled by the elimination of Glass-Steagall, not FRL, as evidenced by the fact that banks choose to park well over $2 trillion at the Fed as excess reserves, instead of lending out a levered up $10 trillion.
FRL has been around for hundreds of years. I think it is being made a red herring to distract people from the much more profitable transactional banking, versus the traditional relation ship banking, which is FRL.
https://www.armstrongeconomics.com/uncategorized/fractional-banking-myth-giro-banking/
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What free trade? Canadians pay duty on everything we buy from the U.S. I just paid $31 on a $500 purchase from an American store. This was true before NAFTA and will continue whether NAFTA is abolished or not.
There is no such thing as free trade and currency fluctuations matter more when cross border shopping.
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The Free Trade versus Tariff debate will continue without end. It usually boils down to Free Trade good, Tariff bad arguments. Those who wish to add a little more to the argument for free trade indulge in hypothetical cases that have no relationship with reality. Others love to misuse statistics, particularly descriptive statistics, as “proof” of the correctness of their arguments. Realtors love to use medians because such a descriptive statistic tends, in the case of many housing markets, to be higher than the average, both of which prove nothing.
Then we have the “Moral Issues” that cloud our thinking. Is it more moral to buy a locally grown apple than an imported one? Gosh, that question has me stumped. On the other hand, buying knock-offs of luxury goods presents us with a good moral problem. It is one thing if I make copies of luxury goods, it is another thing if i label my goods as the same. In the first case the buyer is given the choice of having something that looks like the luxury good he or she desires, it the second, the buyer is defrauded.
Which brings us to other considerations. Quite a number of countries engage in tool making, from hand tools to machine tools. For those of us who use various kinds of tools, we tend to be able to tell the difference between good or well made tools and the poorly made ones. Something as simple as a screw driver may have very good steel used for the shaft and a very good material for the handle. Or it can be very poor quality steel and handle material or something in between. Poorly made tools are a hazard to the user. True, no one ever died from using a piece of crap screw driver but injuries are not unknown as minor as they might be. But poorly made cheap tools drive the better tools out of the market. Most of your brand name power tools are no longer made in this country and even the good Japanese power tools are made in other countries. The bad thing is that such tools are rarely labeled as made somewhere else. And in Europe, I can buy in the UK wood working chisels with the Sheffield label that are made in China or farmed out to another third world country that uses crappy steel. How do I know the difference? The crappy steel can’t hold an edge.
The point should be obvious. Free Trade isn’t. It allows all manner of abuse and even encourages it. Stanley likes to advertise made in America, and some of their tools still are. But most are not. Now these are only a couple of examples. Detroit likes to boast it’s made in America but out side of the shells and frames and perhaps some of the engines, most of the parts are made outside the US. Not that I am a fan of Detroit, most American cars and trucks are crap.
But there is another part of free trade that no economist or free trade booster wants to address. By undercutting the market for many goods and even services, those companies and factories that are located here and employ us citizens tend to get squeezed out of the markets. Many times this is due to the economic force of unions. Union workers are seldom disposed to take wage cuts as are managers. After all, if the cost of living is not decreasing due to free trade, then what is the point of accepting lower wages? Ah, any job is better than no job at all except when it costs more to keep it. Free trade, left to its own devices will squeeze both the working classes and the middle classes into poverty. That is the normal progression. Of course the free trade stops when individuals no longer had the incomes to buy what is imported. Of, but I forgot, government will provide through deficit spending.
Now the logic of my argument is not all that good, but it beats the hell out of “Free Trade good, Tariff bad” argument. Economics is about who gets what when and where. Economic activity is about trade between and among individuals and groups. To push a single minded idea without regard to its consequences is, at least in my mind, immoral.
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It is like the proverbial experiment where the results change depending on if it is being observed or not.
When there is arbitrage available to be traded for profit, “free traders” claim the right to trade it. That arbitrage however would not exist without traders, as it would be unknown in practical terms.
Just because something is possible does not make it right, over consumption of resources because it brings perceived wealth and individual progress does not mean it is necessarily “right”.
If traders cut no profit then I might believe they actually founded their actions on some morality beyond personal benefit. Personal benefit is ok, but then let’s not conflate or confuse the personal motive as automatically attributable to all that take part, as that would be deceit.
Free trade is very natural, it is what most people (at least think) they do most of the time…. since when does it need “enforcing”….but what we call trade accords actually tend to be hyper defined channels of influence that have absolutely nothing to do with free anything…except maybe for the traders ( inc. politicians) themselves.
Everyone else either pays or pays or pays – laws of cause and effect don’t dissappear… so the question is :
Does anyone really know clearly what future is being traded into?
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Free markets are a different concept than free trade since free trade usually involves some sort of currency exchange among other factors. When two countries hare similar in terms of industrialization and economic development, then there is usually little difference between goods and services. Compare France and Germany. Is there really that much difference between Citroen and Volkswagen or Mercedes? One can argue the point but its not like one happens to be a Yugo. The problem often comes when the gaps are large. Then the transactions are further complicated by multinational companies seeking to avoid taxes, fee, and other costs of doing business. It is the non transparent costs that are the killers to economic well being. prices will always be paid, something the free trader fails to understand. when one’s job is mainly the management of money one often fails to see anything else. In a sense, every economic transaction involves a moral choice. The fact that we often ignore the morality of find it less than pressing does not mean it goes away or does not matter. Like everyone else, I often shop for the lowest priced goods. That is a moral choice. On the other hand I may decide that Fred’s Fruit Stand gives me the best value for the price I pay. Thus I trade price for value, a kind of moral value if you like. I am rewarding Fred for his selection of good fruit, not his ability to obtain fruit at the lowest possible price regardless of origin. Individuals make judgements in life.
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free markets = free trade
One cannot have one without the other
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I am sorry Mish but that is a rather glib answer. With all the regulations and various government agencies interfering with what we believe is a free market we might want to rethink that idea of “Free Market”. As a financial consultant you out to know that point very well. As for Free Trade, we know that there is no such thing. Import duties, administrative fees, the foreign goods are net at the dockside with all manner of regulations that impose at least someone’s time to fill out the paperwork and that costs money. I appreciate you stand on Free Trade but I view it as a bit unrealistic.
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It is not a glib comment – it is the truth
Yes, I know full well there is no free market – because there is no free trade, there is a Fed, etc etc.
I never said otherwise
That does not change the truth
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If Mexican wages will be close to American industrial workers salary :
1) Who need Mexico.
2) Corp. US will have a bargaining power to deflate wages in both countries.
3) A new type of mfg facilities, using AI, robots and a very technical work force, will
threaten old fashion way of production in both countries.
Mexico union leaders don’t understand that the good old days, the 100 years,
between Marx and Nixon, are over.
For 100 years an army of millions of workers was organized to stomp everything standing in their way.
They peaked during the FDR era.
They where militant and no real defense was found to slow them down, until :
Nixon opening of China.
The amazing fact is that the strongest hand helping Corp. US, was president Carter.
The new type of work force is more technical savvy, more educated in engineering
fields and with little overtime can earn > $100k.
They are young energetic, sure of themselves men/women in their 20’s.
They don’t care about any swamp, especially DC swamp.
They are not marching for any cause. Nobody command them.
They filter : media, politics, color, minority vs majority ==> for all of that, they are neutral.
They just don’t care about all the noise generated by the above.
Mexico is by far, playing soccer, is tech superior to US and can easily destroy us. But have no chance with the new type of American workers.
Not for the lack of skill. They are very good!!
For a very simple reason : US CAPEX will not be allocated to Mexico, as it was done before in China.
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Moral outrage?
ROTFLMAO!
What’s in your shopping cart UNIFOR members.
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NAFTA is total distraction. The US, Canada, and possibly Mexico too have a permanent trade deficit with China. Also, silicon valley robber barons would not hire American IT workers when they have free access to foreign slave labour. Fix problems where they exist.
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Mish,
Another great read. Two thoughts….First, wage arbitrage has its roots in the post Bretton Woods need to export U.S. dollars. Second, the influx of money to the developing nations economy creates inflation for every citizen even the ones still living on the garbage heep! Some thrive but others are left in even worse condition. I agree jobs are a start!
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So much for globalism.
Pendulums swing back and forth and when they reach toward the end of their swing, the pendulum is getting a lot of push back, to try to prevent it from moving more in the same direction. One can talk about how right or wrong an idea is, but as Mr. Spock said, the needs of the many out weigh the needs of the few. It is alleged that what, 78% are living from paycheck to pay check. The middle class is below 50% of the population. People are unhappy about that. Intellectual arguments about the benefits of free trade wind up falling on deaf ears, when enough people have been down sized out of a good paying job.
The pendulum swung toward globalism, but now there is Brexit and nationalistic sentiment growing elsewhere in Europe, as people are being economically and politically harmed by Brussels Europeanism.
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And a rentier debtist implied he would save domestic workers.
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There is no such thing as a free trade agreement in the current context. It’s one of those political terms that has no meaning. This argument over wages makes my point.
Once governments get involved, all freedom to trade becomes loaded with restrictions and costs. It is on those grounds NAFTA should be abolished. If it is abolished for any other reason, what follows would likely be worse.
Real free trade does exist, but not across national boundaries. It’s between individuals, towns, cities, counties and states where borders are invisible to buyers and sellers. In a free market, buyers and sellers agree to trade. Period!
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Well worth a read, will drag in China too.
http://www.bbc.co.uk/news/business-41152544
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The tail has been wagging the dog long enough.
NAFTA has been a HUGE win for Mexico. Now they don’t want to share the wealth.
F ’em.
I’m tired of our jobs going south and all the Mexican indigents and illiterates coming north.
Rip up the agreement unless Mexico decides to play fair. Toss them back into the prehistoric era.
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I never had a problem when NAFTA was signed initially between Canada and the US. It worked out to be a win-win for both countries. Canada’s manufacturing industry expanded during those years especially the textile industry. Our standard of living is comparable so wages rose as did the quality of both countries products. With the introduction of Mexico every industry felt the hit of closures and layoffs along with stagnation of wages. Once the oligarchs were done with Mexico they moved to cheap labor anywhere in the Pacific Rim. The price of producing products dropped while the price for the product was rising here. As everyone knows quality is not longer a consideration during production.
Mish there are very few unions remaining in Canada today. I believe we can work out some of the wrinkles in the original agreement between the US and Canada to rebuild our economies. There will be costs for education since we apparently forgot how to make a light bulb to consider. The investment will be worth the creation of many millions of new jobs and rebuilding our best industries.
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Hey Dennis. I can sympathize with your view, but you are hoping for something that simply won’t happen.
The FTA between Canada and the US was indeed a win-win for both countries. Back when it was signed, the world was a less competitive place. By the time NAFTA was signed (adding Mexico to the mix), the world was already becoming more competitive.
Even without NAFTA, it was becoming common for companies to expand overseas. Plus foreign competition was getting better (think Japanese cars, then Korean, and soon Chinese).
The second way the world changed was through automation. When it becomes cheaper to use machines instead of highly paid workers, businesses will use machines.
This combination of foreign competition and automation has decimated unions (and their high paid members) because they no longer have any leverage to bargain with. And don’t expect our host to feel sorry for unions and the workers who belong to them. He hates unions.
There is no way to go back. You can’t bring back the horse and wagon to replace delivery trucks. (or a hundred thousand other examples)
You can only move forward. The nations that will be future winners are those that embrace technology, and develop a highly skilled and educated workforce. I devote some of my spare time at a charity that is trying to help older workers, who have lost their jobs, acquire the skills needed to get back into the workforce.
Their stories are all similar: they were hoping to make it through their working life without having to learn something new or upgrade their skills. But the world changed faster than they expected and passed them by. And now they are trying to learn new skills late in life. And though I feel badly for these folks, I can’t change the world, I can only help them adapt to it.
There is no deal that Canada can make with the US that will bring back those high paid union jobs.
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I was making as assumption that Canada and the US would embrace technology together. Several high quality corporations returned their production plants to Germany because they were losing customers. The profit line was initially high using low income off shore workers. However, as the quality suffered, so did the customer patience. Lately smaller homemade industries are expanding in Canada. There are currently too many trade agreements forcing companies and countries to buy off shore products. Does it make any sense for a Canadian city to buy steel from South Korea when both Hamilton and Pittsburgh make a product suited for this climate? (that steel used on a bridge twisted in the winter) Without these so-called free trade agreements we are very competitive.
I agree with you that the unions baked their own cake. In the same way, counting on our leaders to untie the hands of the people and let their creativity grow, is old school thinking. Let’s take off the out-dated blinds of uni-polar industries and move forward with a multi-polar view.
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Reblogged this on World4Justice : NOW! Lobby Forum..
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I agree with our host and his article. I disagree with his misleading headline. “Moral Outrage Over Low Wages: Canada Joins Trump With Threats of Walking Out on NAFTA
“Canada” did no such thing. It was a Canadian Union making this suggestion, not the Canadian government. And it is the government, not the union that is negotiating changes to NAFTA. Our host likes to embellish things at times.
The Canadian government appears to be run by a mature, intelligent adult, who does not tweet a bunch of BS like Trump. I suspect that his negotiating team will work to reach an amicable agreement with both the US and Mexico, that is win-win-win for all three parties.
And when the negotiations are concluded, both Mexico and Canada will talk about how it was a win for all three parties. Trump will however crow to his constituents that he screwed both Canada and Mexico because he is the best negotiator in the world, and that now jobs will come flooding into the US. The reality is that any trade agreement is only signed if it is a win for all parties involved. Otherwise, they wouldn’t sign it. Trump’s claims that NAFTA was a terrible trade agreement for the US is just more of his endless BS.
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I favor completely free trade as long as the playing fields are similar. If one opens completely free trade between an expensive jurisdiction and a cheap jurisdiction; one guarantees production will relocate to the cheap jurisdiction. I am still scratching my head over why our host adamantly supports this. Perhaps he believes that all the regions will eventually find their equilibrium and everyone will be better off? That ideal seems unrealistic.
In reality I think the people in the expensive jurisdiction will have unemployment problems and they will buy stuff on credit. The people in the cheap jurisdiction will improve their lot to a degree, but they will have trouble with workplace safety and their environment will be polluted. If everything progresses ideally, then eventually standards in the cheap jurisdiction improve while hopefully people in the expensive jurisdiction find enough high value things to do that they do not go bust. However, what if there is an oversupply of labor in the world? Too bad, so sad say the economists? Meanwhile, a select group of people will make a bunch of money off the arbitrage between the differing laws in two jurisdictions. How can our host be opposed to governments picking winners and losers and also be in favor of that?
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Thank you, Cautious!!! Mish often lets his “free market economy” mantra-tail wag the dog of advanced civilization. The great empires of history were never, NEVER, built on giving away the means of their high value-added production to one’s “competitors” (read “the conquered”). To do so just dilutes your concentrated wealth so that the “diluted” masses can raise their standard of living from zero to slightly above zero. Tough patooties for them. Find your own way to get ahead like industrialized Europe and we in America did. Globalization (exemplified for instance by the @!$%& Clinton Global Initiative) was a Pandora’s box that would only help along a worldwide race to the living standard bottom, anchored by the poor billions who got to upgrade their meager existence by a miserable piece of squat (as their corrupt leaders got “American wealthy”) at the expense of what used to be a comparatively wealthy but much smaller American middle class that can no longer pursue an honest chance at realizing any semblance of a modern, “American Dream” standard of living.
In the late 50s and 60s, my mom was an elementary school teacher who by herself put a roof over our head, food on the table, bought a new car every four years, help put me through college, took us on an annual road trip, and still left a little money when she passed away. Today, people like her have to reverse mortgage their homes to avoid old age destitution, leaving nothing to their “heirs.” Thank you Mexico, Indonesia, Viet Nam. Enjoy your extra couple of bucks a day.
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Blame the Fed For promoting Inflation – asset bubbles – the cost of tuition – etc. etc. etc.
Instead, you blame the Free Market
What a joke
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Surely you jest. You misread me–and history. What the joke is is how the term “free market” is tossed about as some supposedly self-evident truth to sanctify what in reality is little more than corporate-political larceny and extortion on a worldwide scale. Markets, as practiced in the world, are anything but free (in the sense that their controlling participants want people to think they are), but are only euphemistically referred to as such. You think the great rising economic poobah of China is a “free market” practitioner? Puleeeeeez.
Read Clyde Prestowitz, The Betrayal of American Prosperity, chapters 2 and 3 for starters and you’ll have the best economic lesson on free trade you can get in just 60 pages.
As for the Fed, central bank policies have only exacerbated the modern day transformation to the financialized (also not free-market) economy. That day of reckoning will come, but blaming them for “the cost of tuition”?? I put that on good old universities and predatory lending institutions gaming the college aid system–and each other.
The Fed might be a bunch of dangerous bunglers, but they aren’t to blame for everything.
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You would not know the Free market if it bit you in the ass. And your reading comprehension needs a lot of help too.
For starters I never said we have a free market – we need one.
And yes we have corporate-political larceny – the exact opposite of a free market I would add.
I Neither I nor anyone else remotely suggested China was a free market.
Finally, I have blamed public unions many times for the rising cost of an education.
But the Fed and Fractional reserve lending are the monetary enablers of this mess.
Mish
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Read Clyde Prestowitz, The Betrayal of American successfulness, chapters 2 and 3 for starters and you’ll take the best economic moral on liberal bargain you can aim in just 60 pages.
There is no bargain that Canada can stool with the US that will convey back those in high spirits paid North jobs.
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