The Truth about NAFTA: Good for the US. Bad for Mexico and its Workers.

People in the US, most notably president Trump, are fueling criticism of NAFTA for being bad for US workers. But a closer look reveals most of the negative effects of NAFTA have been endured by workers in Mexico. At the very least, negotiations should be driven towards increased protections and labor standards so the promise NAFTA made to help improve the lives of workers in Mexico, can be fulfilled. 

Most studies show that NAFTA was not the main cause of the loss of manufacturing jobs in the US. The US has shed two-thirds of relative manufacturing employment since 1971. Many factors have contributed to this decline in technology and the reduction in transportation costs of manufactured goods. Some research has suggested the number of jobs displaced by NAFTA amounts to about 120,000 or 0.1% of the US labor force. 

While NAFTA has had little effect on the US aside from a small decrease in manufacturing jobs and a boom in avocado consumption, it has been a disappointment for Mexico. During NAFTA’s proposal, it was sold as something that might shrink the salary gap between Mexico and the US. However, Mexico’s economy has grown at the dismal rate of 1.2% per capita year from 1994-2016. 

Mexico’s labor productivity has grown by less than 10% since 1994 when NAFTA took effect. During the same period, Canada’s labor productivity grew by 3 times that of Mexico’s and US productivity grew by 4 times that of its southern neighbor. Mexican manufacturers make an average of $13 a day while US workers with similar jobs make $25/hour which is a large increase for the US since 1994. 

NAFTA also promised to create an agricultural boom in Mexico. More than twenty years later Mexico imports 45% if the food it consumes. It relies on the US for staple Mexican crops like corn, rice, and beans. In fact, 99% of the corn in Mexico comes from the US. Why? Competing with agricultural giants has put farmers in Mexico out of work. And there is a lot of evidence that the quality of the food coming out of the US has contributed to an obesity problem in Mexico. 

Perhaps a renegotiation of NAFTA can be a good thing for Mexico. Putting labor standards in place has been suggested by several US senators in the form of ILO conventions.  Canadian prime minister Justin Trudeau has pushed for implementing strong and progressive labor standards in a negotiated version of NAFTA. Hopefully, they will make some progress. 

India Charges Mining Baron With Fraud (New York Times)

NEW DELHI — One of India’s most powerful mining barons, whose political clout and wealth have made him a controversial national figure, was arrested Monday as investigators raided his offices and seized about $1 million in cash and more than 66 pounds of gold.

Until recently, the mining baron, Janardhana Reddy, was a kingmaker in the southern state of Karnataka, where his family and allies once dominated important ministries. From his base in the Bellary district, home to some of India’s richest reserves of iron ore, Mr. Reddy controlled a mining empire in Karnataka and the neighboring state of Andhra Pradesh and made untold millions of dollars exporting ore to China and elsewhere.

Mr. Reddy was charged with illegal mining in Andhra Pradesh, after a Monday morning raid at his headquarters in Bellary. According to India’s Central Bureau of Investigation, “several incriminating documents” were confiscated, as well as the cash and gold, itself worth more than $1 million. He was also charged with fraud and criminal conspiracy.

“It was a mafia-like system,” said N. Santosh Hegde, a former justice on India’s Supreme Court who spent more than two years investigating illegal mining in Karnataka as an independent state-level ombudsman. “That district had become the Republic of Bellary. It is not part of India.”

Mr. Reddy’s arrest comes as public disgust over official corruption has boiled over in India. Hundreds of thousands of protesters took to the streets last month to support a hunger strike by the anticorruption campaigner Anna Hazare, a pressure campaign that forced Indian leaders to capitulate to many of Mr. Hazare’s demands over the shape of a proposed independent anticorruption agency.

Mr. Reddy and his brothers were once political organizers who traveled on scooters to work on behalf of the Bharatiya Janata Party, or B.J.P. Their political work and the money they raised for campaigns helped the party win control of the state government, while entrenching the family as the political kingpins of Bellary. Rivals complained that Mr. Reddy used his political power for his own competitive advantage in dominating the mining and transport of iron ore.

Mr. Hegde, who recently stepped down from his ombudsman role in Karnataka, released a scathing report in July that concluded that illegal mining had cost the state treasury more than $3.5 billion in tax revenues. In his report, Mr. Hegde said the Reddy brothers had created a system to avoid paying royalties to the government, while also taking a cut from any ore shipped, illegally or legally, out of Karnataka.

Mr. Reddy has consistently denied any wrongdoing. But his power was so vast that his political allies once nearly brought down the state government — run by his own party — to protest a plan to increase taxes on ore shipments. Eventually, though, Mr. Reddy became an embarrassment for national B.J.P. leaders. And in Karnataka, the mining scandals forced the resignation of the former B.J.P. chief minister, B. S. Yeddyurappa.

Even today, Mr. Reddy’s political influence is potent inside Karnataka. The state authorities have yet to take any legal action against any of the people named in Mr. Hegde’s report.

The Empty Promises of the Free Market

Photo by John Attebury

Government Regulation gets treated like the girl at the party no one invited. But it's the only thing that can save us now, and since we are generally undereducated when it comes to the way our governments, home loans, or credit cards work, I'm worried we may lose it.

I don't see regulation as slipping the handcuffs over the Adam Smith's precious invisible hand, but telling the hand not to steal from us or poison our people. Letting big business do what it wants doesn't seem great for the common man. But these teaparty folks who are supposed to represent "joe the plumber" are trying to kill the middle class off.

Why do big energy companies avoid taxes? Because we don't give our government enough power to go after them. The IRS goes after the little guy, because the little guy doesn't have a lawyer and an expensive accountant. The IRS doesn't have enough money to go after the big guys, because they don't pay taxes and the IRS is underfunded. It's a mess, but it's our fault. We have to stop saying no to taxes and hold our government more accountable when it comes to spending.

As Americans we need a serious attitude adjustment. How is it that we stand by and let the people with the most money just keep it? I think most of the people who have a ton of money got their by learning that sometimes you have to cheat. And now we have the real American dream: Cheating your way into Millions and not getting caught.

I've been reading pro-free market responses to the banking crisis. They imply we don't need to put in laws to protect "stupid people who can't read a contract." Have you taken a look at a credit card application recently? Or the letters they send you when they change the APR rules on you. It's really f'ing complicated, and I consider myself and educated person. In fact, I have a college degree. It seems like allowing people to sign something they dont understand while dangling a carrot in front of them like, for instance, money they need to feed their kids, is wrong.

So... When I take my trips to India hoping to inform the population and improve working conditions, I feel a little hopeless. Indian government regulation in the mining sector is a joke. And it's such a joke, it's taken the wind out of my sails. People make money enslaving others, and bribe they people who regulate their industry. Everyone knows it and while some NGOs are making a stink, things seem to be getting worse. Large companies are going to rape the resources of the third world and charge them for infrastructure projects meant to increase employment, but in the end will increase slave labor and the bank accounts of the people in the world that are already rich.

Concepts I take issue with:

Private enterprise works on a voluntary basis ->
Yes. If poor people had options I would buy this.

markets are self-regulating ->
Reading this and knowing people believe it makes me cry.

Chilean Miners are Set Free

I am saddened to see what has happened to the coal miners in Chile, but am happy to see them being set free. In Chile, little regard is given to safety, and all focus is on production. Chile does not have the appropriate regulatory regime. US death rates have dropped dramatically with Mine Safety Organizations and Federal Government oversight. Some politicians in the United States have been coming out against regulations which is horrific. Self regulation is not a possibility.

Recent news about workers in China has been exciting for labor movements. Labor unrest in China is becoming common place. Chinese workers are demanding fair pay and reasonable hours. Laborers are walking out of their jobs to demand higher pay and better working conditions. Labor activism can no longer be ignored by investors who are interested in doing business in China.