Market Realities Put the Brakes on Trump
Published in Excélsior
(Mexico) on 1 February 2017
by Jorge Fernández Menéndez (link to original)
Our border problems are one thing, but what happens or does not happen with NAFTA is not a problem at all. Companies exporting to the United States know that the U.S. manufacturing supply does not meet the country's demand. Their businesses have, at most, become assembly lines, and the economy is no longer manufacturing-based. My customers in New York, Los Angeles and Texas voted for Trump but still want products or components that come from Mexico, China or elsewhere in the world because very few are American-made. Just yesterday, this is part of what a group of business people told me at the Salinas Group advisory council meeting in Tijuana.
They share the opinion that NAFTA is good, that it allows for joint production chains, that it is necessary, but that export capacity to the U.S. will not be stopped by the measures announced by the White House for the simple reason that the United States cannot reindustrialize itself. The only consequence would be a 30 to 40 percent increase in products consumed by Americans, something that their own market cannot bear. And they are right. Domestic firms in Mexico that have truly been competitive over the last quarter century will continue to be so with or without NAFTA. The market north of the border will not just dry up for the simple reason that, without our contribution, a good part of what is left of U.S. industry would not operate or would run at exorbitant cost.
In a recent editorial, Bloomberg added a fact that further strengthens this reasoning: For each 100 employees that a U.S. business creates abroad, it is creating 250 in its own country. Failing companies are those that do not integrate production or establish factories abroad, that stop being competitive, and that wind up closing.
There are many standards that could be revised in order to make integration much more efficient, but Trump's proposal will hinder that process and place it at risk when it's obvious that it works.
The Tijuana business people told me that in the capital, they just don't understand how things work at the border. They laughed at the vision Mexico City holds about the manufacturing industry and its implications. They gave the example of the many factories that left Mexico for China and that have now come back to our country because costs, labor quality, corporate integration and transportation end up making an important difference when it comes down to producing.
After just ten days in government, the series of conflicts President Donald Trump has started seem to go on and on. So far he has strongly clashed with the press, saying journalists are the most dishonest people in the world; with ecologists after breaking environmental laws passed by the Obama administration; with Jews, downplaying the Holocaust; with Muslims, by denying entry into the U.S. from seven Middle Eastern countries; with Mexico, through NAFTA and the border wall; with the European Union, threatening a withdrawal from NATO, supporting Brexit, and cozying up to Russia (the European Council declared Trump a security threat to the European community); with Great Britain, specifically, for meddling in its domestic politics (Parliament decided to debate whether or not to accept Trump's next visit); with China, against which he wants to start a trade war; and with women for anti-abortion executive orders.
Now, with Trump in power, the United States is more alone than ever. Given all of this, it is not surprising that after the first few days of euphoria after the election, Wall Street is steadily declining and even the dollar has lost value.
The Trump agenda is becoming more ideological and is starting to bump up against reality and market forces. The New York Times argues that the strategy of permanent conflict—anti-Mexico, anti-Muslim, anti-Jew, anti-feminist, anti-ecologist, anti-Europe and anti-liberal—is the design of senior adviser Steve Bannon. Bannon, an ultra-right-winger and racist, is the former director of the website Breitbart where the biggest lies and attacks of the election were launched. Furthermore, Trump just placed him on the National Security Council.
Reality and the markets are putting the leash on Trump, much sooner than thought, both within and outside of the United States. These are two things that even the most theocratic, stalely conservative, ideological government oblivious to reality cannot, or will not, be able to control. My business colleagues in Tijuana are right: with or without NAFTA, they will continue to produce and trade with their partners across the border, simply because they need what we have.
They share the opinion that NAFTA is good, that it allows for joint production chains, that it is necessary, but that export capacity to the U.S. will not be stopped by the measures announced by the White House for the simple reason that the United States cannot reindustrialize itself. The only consequence would be a 30 to 40 percent increase in products consumed by Americans, something that their own market cannot bear. And they are right. Domestic firms in Mexico that have truly been competitive over the last quarter century will continue to be so with or without NAFTA. The market north of the border will not just dry up for the simple reason that, without our contribution, a good part of what is left of U.S. industry would not operate or would run at exorbitant cost.
In a recent editorial, Bloomberg added a fact that further strengthens this reasoning: For each 100 employees that a U.S. business creates abroad, it is creating 250 in its own country. Failing companies are those that do not integrate production or establish factories abroad, that stop being competitive, and that wind up closing.
There are many standards that could be revised in order to make integration much more efficient, but Trump's proposal will hinder that process and place it at risk when it's obvious that it works.
The Tijuana business people told me that in the capital, they just don't understand how things work at the border. They laughed at the vision Mexico City holds about the manufacturing industry and its implications. They gave the example of the many factories that left Mexico for China and that have now come back to our country because costs, labor quality, corporate integration and transportation end up making an important difference when it comes down to producing.
After just ten days in government, the series of conflicts President Donald Trump has started seem to go on and on. So far he has strongly clashed with the press, saying journalists are the most dishonest people in the world; with ecologists after breaking environmental laws passed by the Obama administration; with Jews, downplaying the Holocaust; with Muslims, by denying entry into the U.S. from seven Middle Eastern countries; with Mexico, through NAFTA and the border wall; with the European Union, threatening a withdrawal from NATO, supporting Brexit, and cozying up to Russia (the European Council declared Trump a security threat to the European community); with Great Britain, specifically, for meddling in its domestic politics (Parliament decided to debate whether or not to accept Trump's next visit); with China, against which he wants to start a trade war; and with women for anti-abortion executive orders.
Now, with Trump in power, the United States is more alone than ever. Given all of this, it is not surprising that after the first few days of euphoria after the election, Wall Street is steadily declining and even the dollar has lost value.
The Trump agenda is becoming more ideological and is starting to bump up against reality and market forces. The New York Times argues that the strategy of permanent conflict—anti-Mexico, anti-Muslim, anti-Jew, anti-feminist, anti-ecologist, anti-Europe and anti-liberal—is the design of senior adviser Steve Bannon. Bannon, an ultra-right-winger and racist, is the former director of the website Breitbart where the biggest lies and attacks of the election were launched. Furthermore, Trump just placed him on the National Security Council.
Reality and the markets are putting the leash on Trump, much sooner than thought, both within and outside of the United States. These are two things that even the most theocratic, stalely conservative, ideological government oblivious to reality cannot, or will not, be able to control. My business colleagues in Tijuana are right: with or without NAFTA, they will continue to produce and trade with their partners across the border, simply because they need what we have.
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