For years I thought that what was good for our country was good for General Motors, and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country. Our contribution to the nation is considerable.
– Charles E. Wilson, 1953
As president of General Motors, Wilson led the firm through World War II, then became Secretary of Defense under Dwight D. “Ike” Eisenhower in 1953.
Eisenhower later decried the Military-Industrial Complex (MIC), not mentioning Wilson, but the public got the message – huge firms were getting rich from Defense spending.
Nearly 70 years later, little has changed for the fortunes of giant automakers, except now they have exported much of their manufacturing to Canada and Mexico, cutting American workers. The new slogan is: What’s good for General Motors is very good for America’s neighbors.
Our U.S.A. President Donald Trump promised during his campaign to end or amend NAFTA – that treaty which eliminated tariffs so the Big Three automakers could build their cars in factories adjacent Mexican slums (minimum wage: 66 cents an hour), or take advantage of special tax and other deals with Canada.
The result of NAFTA was more profits for big corporations and millions fewer good-paying jobs for Americans.
Now, Trump has a new NAFTA deal. If the terms sound familiar, you broke the code. Bloomberg News describes it this way:
The accord will exempt as many as 2.6 million vehicles imported annually from Canada and another 2.6 million made in Mexico from a proposed 25% tariff now under consideration by the Trump administration on foreign-built cars sold in the U.S., according to drafts posted to the website of the U.S. Trade Representative…
General Motors Co. applauded the accord, saying it has long supported efforts to modernize the existing free-trade pact among the three countries. “This agreement is vital to the success of the North American auto industry,” the auto maker said.
Ford Motor Co. also said it supported the deal, while Fiat Chrysler Automobiles didn’t immediately return requests for comment.
Car companies would also have to make sure 40% to 45% of the vehicle is made by workers earning at least $16 an hour, which is supposed to be a provision aimed at steering more work to the U.S. to generate manufacturing jobs. Vehicles that don’t meet the new rules will be subject to a minuscule 2.5% tariff.
Read that again – a 2.5% tariff if a car doesn’t meet the treaty rules. The math makes this just foolish. A $20k car from Mexico would incur a $500 tariff, a sum easily recovered by paying slave wages for its manufacture in our volatile southern neighbor. That 2.5% is a cheap price to avoid the U.S. $28-an-hour union wage and safety and environmental regulations.
Some 4.1 million cars and trucks were imported from Canada and Mexico last year – nearly a quarter of all new vehicles sold in the U.S. in 2017, according to LMC Automotive. That’s far less than the 5.2 million vehicles exempted under the new trade deal. The cap doesn’t even include light trucks, such as most pickups.
The final irony is that many foreign auto companies are constructing factories to use Mexico and Canada as export hubs to the U.S. and other markets globally. For them, 2.5% is a tiny cost, compared to their usual tariff charges.
In 1992, when Trump was probably distracted by his divorce proceedings with Czech model Ivana Zelníčková, Presidential candidate H. Ross Perot correctly predicted NAFTA’s danger this way:
You can fool nearly all the people... 