The Trade Deficit That Isn’t

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Presidential Counselor Kelly Anne Conway on Fox News Sunday January 29, 2016: “I’ll tell you what’s not a great thing, here’s not a great thing — it’s not great that we have a $60 billion trade deficit with Mexico.”

I’ve met Kelly Anne Conway, she is bright and very nice. But on some subjects she has not a clue. Trade with Mexico is one. She is not alone.

In my San Diego County 100,000 men and women work in direct trade with Mexico. Add the people in retail stores, gas stations, fast food restaurants, private schools and tourist attractions like Sea World, the San Diego Zoo and LEGOLAND. Mexican visitors annually spend two-three billions of dollars in my county.

Does Conway know that the U.S. sells Mexico 30% of the beans it eats, 50% of the wheat, 80% of the rice and over 17 million tons of yellow corn, as well as other fresh and processed foods?

17 million tons of corn? Corn that was created from grass in the Valley of Mexico eons ago? Corn that covers almost every square inch of Iowa, Illinois, etc.

Does she know that every car made in Mexico, including German, Japanese, Chinese and American brands include 40 or more percent of American-made parts from Michigan and Ohio?

Does she know that the principal complaint by her boss of American jobs going to Mexico is untrue?

“Google” job loss to Mexico under NAFTA. 50,000 jobs-a-year were lost during the first 20 years of NAFTA (13% of all jobs lost). Jobs lost to automation in the American manufacturing sector (80%+plus) dwarfs jobs that went to Mexico.

Jobs have disappeared to automation, consolidation and computers. Enter any large bank and count the empty desks which used to be filled by people.

Newspapers: I visited San Francisco’s Chronicle newspaper and two-thirds of its building was empty. In San Diego, the newspaper is now printed in Los Angeles. Its staff was moved from its own building that used to hold hundreds of staffers to a downtown high-rise. There, several dozen staffers work in three floors — a fraction of what the paper employed five years ago. No “paper boys” today either.

American jobs disappear as fast as they are created. Fortunately more jobs are created than disappear. “Google” jobs lost/created. One finds Bureau of Labor Statistics on job losses/gains. Jobs lost to Mexico “might” be 150,000 jobs in a given quarter. One will find that in the first quarter of 2016 over 5,000,000 jobs were lost in the U.S. That’s five million.

NAFTA, the North American Free Trade Agreement, is not the cause of job loss in the United States; both Kelly Anne Conway and President Donald Trump are wrong.

President Trump’s accusation that NAFTA is the worst trade agreement ever — that it’s a disaster, is not only wrong it is terribly wrong. NAFTA may be the best trade agreement in world history.

The trade deficit with Mexico is not disastrous, it is not transferring American wealth to Mexico. It is, in fact, creating billions of dollars of American wealth as well as six million jobs. The deficit? Mexicans sell more to the U.S. than Americans sell to Mexicans.

Income distribution has much more to do with the deficit than governments. There are more poor people (50%) in Mexico and they can’t buy as much as American poor (15%) that because they have much more income, can buy more.

Every dime an American saves by purchasing a duty-free widget or car made in Mexico is a dime the American has to purchase another product from another business, or to deposit into a savings account.

A macro look at the billions Americans save by buying a Mexican-made car or “Avocados from Meh–ee–coh” or the billions Americans earn from selling to Mexico proves NAFTA, on balance, is good. The U.S. has a positive trade balance with Mexico in manufactured goods, high-tech and agricultural products, for example.

In American savings and sales we speak of billions.

Americans sell millions of tons of corn and thousands of products Mexicans buy at their local Ford dealership, “Costco,” “Sam’s Club” or “Wal-Mart.” Once Americans know that, they might deduce that Kelly Anne and Donald Trump are wrong about NAFTA—and Mexico.

Contreras is the author of THE MEXICAN BORDER: IMMIGRATION, WAR AND A TRILLION DOLLARS IN TRADE (Floricanto Press, August 2016).