Publish in Analysis - Wednesday, July 1, 2015
Donald Trump: Mexico has our jobs. They’re killing us economically. (Photo: David Shankbone)
Ford's Cuautitlán plant in Mexico. Trump is threatening to slap taxes on cars made in Mexico. (Photo: Ford)
Donald Trump wrong on Mexico hurting US economy and jobs.
BY LATINVEX STAFF
In his presidential bid announcement on June 16, businessman Donald Trump managed to not only insult Mexicans and Latin Americans by generally calling them rapists and drug traffickers -- leading Mexican mogul Carlos Slim (the world’s second-richest man), NBC and Univision to cancel TV deals with Trump -- but also committed several factual mistakes as relates to US business with Mexico.
MEXICO KILLS US
Trump: They are beating us economically. They are not our friend, believe me. But they’re killing us economically.
Facts: US exports to Mexico are growing faster than imports from Mexico. US
exports to Mexico increased 6.3 percent last year to $240 billion, while
imports grew 4.9 percent to $290 billion.
If Trump was referring to the US trade deficit with Mexico, it is worth noting that Mexico is the only major US export market that also buys heavily from the United States.
For every dollar that the United States buys in Mexican goods and services, Mexico buys back 82 cents in US goods and services.
In contrast, for every dollar in Chinese goods and services the United States buys, China only buys back 26 cents in US goods and services.
The US trade deficit with Mexico last year was $53.9 billion, or a little over 10 percent of the total US trade deficit of $508.3 billion. Meanwhile, the US trade deficit with China stood at $342.7 billion, which was six times higher and accounted for 67 percent of the total US trade deficit in 2014.
The US trade deficit with Mexico was smaller than the US deficit with Germany ($73.8 billion) and Japan ($66.9 billion).
US exports to Mexico also outperformed the Latin American average of 3.7 percent last year.
However, even deficits are not necessarily a sign of negative business relations. The value of US imports from Mexico reflects a demand by US companies and consumers, who could just as easily have bought 100 percent US-made goods and services, but for whatever reason opted to choose those made in Mexico.
MEXICO TAKING AWAY US JOBS
Trump: A lot of people up there can’t get jobs. They can’t get jobs, because there are no jobs, because China has our jobs and Mexico has our jobs. They all have jobs. …I’ll bring back our jobs from China, from Mexico, from Japan, from so many places.
Facts: Only a fraction – less than 1 percent -- of US manufacturing jobs are attributable to offshoring, according to the US Chamber of Commerce, which quotes data from the Bureau of Labor Statistics showing that with the separation of 262,848 workers from their jobs in the second quarter of 2012 in “mass layoffs” (i.e., layoffs of 50 or more workers), only 1,315 of these layoffs — one-half of one percent of the total — resulted from movement of work to an overseas location.
Meanwhile, the United States added more than 800,000 jobs in the four years after the North American Free Trade Agreement (NAFTA) entered into force, linking the economies of the United States, Canada and Mexico, according to data from the Bureau of Labor Statistics quoted by the US Chamber of Commerce.
“This boom in factory jobs came after a period before NAFTA entered into force (1980-1993) when the United States shed nearly two million manufacturing jobs,” the chamber points out. Trade with Canada and Mexico supports nearly 14 million U.S. jobs, and nearly five million of these jobs are supported by the increase in trade generated by NAFTA, according to a comprehensive economic study commissioned by the U.S. Chamber.
Meanwhile, according to Commerce Department research, jobs tied to exports pay wages that are typically 18 percent higher than those that aren’t, so the shift in the mix of U.S. jobs toward more export-oriented industries represents a net gain for working Americans.
It is also worth noting that Mexican companies have contributed to US job
creation through significant investments.
“Since the signing of the NAFTA, Mexico has made significant investments in the United States particularly in the sectors of cement, bread, dairy, and retail that contribute to our job creation,” Carla Hills, the US Trade Representative who lead the U.S. negotiations for NAFTA, wrote in a commentary in Latinvex in 2012. “NAFTA has made both the U.S. and Mexico more competitive and more productive through the opening of our markets and the increase of our interdependence.”
Trump: Ford is going to build a $2.5 billion car and truck and parts manufacturing plant in Mexico. (…) They’re going to build in Mexico. They’re going to take away thousands of jobs. It’s very bad for us.(..) Every car and every truck and every part manufactured in this plant that comes across the border, we’re going to charge you a 35-percent tax, and that tax is going to be paid simultaneously with the transaction, and that’s it.
Facts: NAFTA enabled carmakers – and other manufacturers -- in the United States, Mexico and Canada to take advantage of economies of scale. As a result, consumers would be able to buy less expensive cars and other manufactured goods in all three countries.
Meanwhile, singling out one new auto plant for punitive taxes would almost certainly not be legal under American law, with companies being free to build plants where they want, according to the Detroit News.
“Automakers are bypassing the U.S. for new plants in part because Mexico has dozens of free trade agreements around the world, low wages, free or nearly free land on which to build and fewer regulatory hurdles,” the newspaper says.
RENEGOTIATION OF TRADE AGREEMENTS
Trump: Renegotiate our foreign trade deals.
Facts: Any US action to the detriment of Mexico or other trade partners will result in similar actions against US exports, thus hurting not only US companies and consumers who want to buy Mexican goods and services, but also US manufacturing companies selling to Mexico.
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