Wednesday, January 16, 2008

Granpa's Political Corner: Trade Agreements

I read an article "An Industry That's Fraying Fast" in the January 14, 2008 issue of Businessweek. "The rising rupee has Indian textile makers losing business and laying off workers". "In August, Gokaldas Exports, India's largest apparel exporter, sold out to private equity player Blackstone Group for $165 million". "Other Indian mill operators are going offshore. Welspun India, for example, a $240 million maker of towels and sheets, has built a factory in Mexico from scratch. Now it can sell to U.S. customers without worrying about the rupee". An example was given. "The 40-year-old Sivakami works for Stallion Group, a $20 million garment manufacturer in Tirupur, a town of 800,000 that is a center of India's apparel industry- and a focal point for a gathering crisis in Indian manufacturing. For the past six months, Sivakami's eight work shifts a week are down to six. Her current $70 monthly income has shrunk 25%, and she has been struggling to feed her unemployed husband and c ollege-going son".

This caused me to stop and wonder why and how such a situation could come about.

Back before NAFTA and other trade agreements and the concept of free global trade and competition we had industry and a developing "middle class" that were able to enjoy the fruits of their labor and then some. We were able to control the cost of imported goods to be competive with goods produced here. However, it seems to me, this was not good enough and we were not selling our goods abroad as much as we could. Think of all these global markets just waiting to be exploited. If we can have "free" trade we can move our factory to a less developed area, use "cheap" labor, reduce the cost of the product and sell the product in the U.S. as well as elsewhere. Nevermind the loss of jobs occasioned by the move and the impact on those who lost their jobs. Nevermind the ripple effect throughout the economy. The corporation will profit.

In Mexico, I am told, many of the local farmers grew corn and marked it locally. After NAFTA carn could be grow by large producers in the U.S. and sold in Mexico for less than the small local farmer. The local farmer loses his income and must provide for his family. What does he do? He goes to the U.S. where he can earn a living and send back money for his family, there being no jobs in Mexico.

Both the Indian and the Mexican examples are repeated many times in the U.S. as we continue to lose manufacturing and other jobs to offshoring.

Now comes the "Security and Prosperity Partnership of North America". Under this agreement there is to be free exchange of trade and free movement of people between Canada, U.S.A. and Mexico. Guess who proposed this to our president, you got it, Vicente Fox president of Mexico. Two things that define a nation are: 1) A defining border, 2) A system of government unique to that nation (our Constitution). It seems to me that the removal of restrictions on movement and occupying a nation effectively removes the border. It seems to me that when citizens of a foreign nation, residing and working in the nation are not governed by the law of the land (our Constitution) but remain citizens of and governed by a foreign power, then we have lost the second defining element of a nation, a form of government unique to that nation.

Using the NAFTA and SPP agreement there are plans to build a highway from the Mexican border at Laredo, Texas to the Canadian border north of Duluth, Minnesota. Mexican trains acquired by Kansas City Southern Railway Company intend to operate as a "NAFTA railroad" to carry containers from the Far East to the Laredo border. The first customs stop in the U.S. will be a Mexican customs office in the Kansas City SmartPort, a facility being built for Mexico at a cost of $3 million to the U.S. taxpayer. I understand Mexico plans for deep water ports to receive Pacific ships which can down load containers directly onto rail cars for shipment to the Kansas City (Mo) SmartPort. The aim - cheaper goods from other nations. How does this impact jobs in the U.S.?

Ask yourself. Where do most of us turn when we can no longer tap into the equity of our homes and we have maxed our credit cards? Which of the candidates running for the office of President of the United States has addressed the problem? Are any of the candidates of a stature to tackle these problems?

Knew darn well I shouldn't have read that article in the first place.

Granpa Graham

1 comment:

Marshall said...

Here is a good article about the "NAFTA Superhighway"
and another little one about Ron Paul and Fred Thompson in National Review (which is kind of a big deal in the conservative political world)

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