Thursday, February 2, 2017

How about this for an "alternative" fact: The U.S. trade imbalance with Mexico is actually too little

Why are Donald Trump’s attacks on NAFTA hypocritical and out-of-touch with reality? Try to wrap your head around this, if you can: The U.S. has a population of 300+ million, and the average annual personal income of $44,000 in 2015. Mexico has a population of 120 million and an average personal income $13,000. Mexico imported $235 billion worth of products from the U.S. in 2015, and exported $295 billion. What this means is that residents of Mexico purchased on average almost $2,000 worth of U.S. products per person, or 16 percent of their purchases. U.S. residents, on the other hand, purchased about $950 of goods from Mexico, or 3 percent of their purchases, per person. 

Of course, this is an overly simple way of looking at this, since if someone purchases a car made in Mexico, the amount spent by one person can be spread out quite thin (one purchase of a car can account for the purchases of 30 other people who purchase no products at all “made in Mexico,” save for produce. Meanwhile in Mexico, American-made goods generally fall into the hands of the relatively “affluent”: the Organization of Economic Cooperation and Development reported in 2015 that Mexico has the worst income disparities among its member nations, with just 2,500 people holding 43 percent of the nation’s wealth (financier Carlos Sims alone holds the equivalent of 6.3 percent of the nation’s GDP), while over half the population lives in poverty; the bottom twenty percent’s average net worth is a scant $80. Obviously most Mexicans have not reaped the benefits that Trump fear-mongers that they have.

Another fact that does not have “alternative” interpretations: China, Japan and Germany all have vastly larger economies and purchasing power than the typical Mexican resident, yet combined they purchase less U.S.-made goods than Mexico; China alone has 5 times the population of the U.S., and its GDP is currently 60 percent that of the U.S.; yet it’s exports are nearly five times that what it imports from the U.S.. China’s exports are certainly more “obvious” than Mexico’s, seemingly most of the apparel we wear and the electronic gadgets we use.  With all three of these countries the U.S. has larger trade deficits than it does with Mexico--by six times in the case of China.

Again, everything is “relative.” Since the U.S. has a larger economy than every other country, it can technically “absorb” more imports than the countries it exports to. Thus it can be said that U.S. trade with Mexico actually benefits the U.S. disproportionately, while trade with Germany is more “proportionate” given that its buying power is only a quarter that of the U.S.’, while China obviously does not absorb anywhere near a proportionate amount of U.S. exports as the U.S. does from China. Trump’s claims about jobs being “lost” to Mexico far pale in comparison to jobs that have simply disappeared because U.S. companies could not compete with low-cost products from Asia.

In order to achieve a trade “balance,” the U.S.—besides somehow forcing a more proportionate trade with China—has had to take advantage of the markets of countries with lesser economies, such as “developing” or “Third World” nations, and force them to take in excess U.S. products, while importing virtually nothing from them. This seems hardly “fair,” although it would come as no surprise that Western “brands” are more popular than the homegrown variety, denoting “social status.”. 

In any case, as former Vermont governor and progressive Howard Dean recently opined before a Canadian audience, attacks on NAFTA are out of proportion with reality, and serve no purpose but to harm relations and the economies of all three nations of NAFTA. There are other, far more pertinent issues that prejudice against Mexico and Mexicans cannot explain, and it is hardly in the U.S. interest to create a “failed” state right on its southern border.

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