Trump on the Economy: Nonsense and Truth

In addition to his frequent outbursts against women, Muslims, and Mexicans, Donald Trump will also be remembered for his pronouncements on the economy. An example includes those on international trade, which the Republicans have historically been in favor of promoting to suit U.S. interests. But Trump has broken with this way of looking at trade, and says he will withdraw from the economic alliances the United States has with the rest of the world in order to encourage job creation at home. And to do that, he promises that if he is elected president, he will renegotiate or terminate the 20 trade agreements that are in effect, and will levy a 45 percent tariff on imports from China, and a 35 percent tariff on goods from U.S. companies that have moved their manufacturing to Mexico, especially in the automotive sector. In the case of China, it is estimated that imports from that country resulted in the loss of 2.5 million jobs. The official numbers for Mexico are not known, but some studies say that 800,000 jobs were lost due to NAFTA.

That kind of demagogic, xenophobic, and isolationist talk finds a willing audience in millions of U.S. families with one or more members who do not have a job or would like better income and benefits. This kind of rhetoric repudiates U.S. transnational companies, because they exploit the advantages offered to them by Mexico: cheap labor, third-world environmental protection laws, tax exemptions and other perks given to them by federal, state and municipal governments.

In his quest for votes, Trump has promised to renegotiate his country’s free trade agreement with Mexico and Canada, which has been in force since 1994, as well as the treaty that President Obama signed with Japan and ten other countries. In addition, there is the most recent treaty, the Trans-Pacific Partnership, in which Mexico is a participant, and which will bring us many problems. Congress, and not the sitting president, approved all of those treaties. They represent a third of the gross world product, and a quarter of the international circulation of goods.

Trump is right to claim that Mexico, China, and other countries have been giving very large incentives to U.S. companies, bundling multiple concessions on wages, environmental protection, and taxes. Companies from other countries are also being offered incentives, as two recent representative examples show. In the Mexican state of Nuevo León, the previous administration agreed to so many concessions for the Korean automaker Kia Motors in the city of Pesquería that the current governor, Jaime Rodríguez (known as “El Bronco”), refused to accept them. The incentives totaled almost 12 billion pesos – equivalent to about $650 million at current exchange rates. After intense and bitter negotiations between Kia Motors and the state government, the incentive package was reduced to one third of its original value. And the Korean company is obligated to pay better wages than those agreed previously, and is required to obtain parts and supplies from local companies. No additional requirements were imposed in the area of environmental protection.

In Guanajuato, through a million dollar fraud scheme in the state government since the administration of Miguel Márquez of the National Action Party (PAN), and in collusion with local businessmen, automaker Toyota will get a 294 hectare (726 acre) site for an automobile assembly plant. One Santiago Germán Bordes bought the land at a very low price from ejido members and then sold it to the state government at a price 42 times higher.* This is a good deal, protected by state power, to enrich a few and the Japanese automaker. One would hope that the PAN governor would investigate a deal like this, since it is an example of extreme corruption, but he has not done so. Nor has the government acted to prevent high levels of environmental contamination in Guanajuato, resulting from the operations of various companies, from seriously impacting thousands of families and the environment.

Finally, mention should also be made of incentives that the German automaker BMW received from the state government of San Luis Potosí and the federal government to open an assembly plant in the city of Villa de Reyes. The plant will cover the market throughout Latin America. But the effects on the environment and natural resources, especially water, are clear to see.

*Translator’s note: In the Mexican system of government, an ejido is an area of communal land used for agriculture, on which community members individually farm designated parcels and collectively maintain communal holdings.