American Corporations First

The cry of “America first!” plays off some large misconceptions on America’s international relations. Mainly, that we are a paragon of goodwill and an adherent to high moral values in our dealings with other countries – so much so, that we have permitted other countries to eat our lunch in trade relations. That is far from the truth. We have helped depose democratically-elected leaders and have supported interest-friendly autocrats and puppet regimes the world over. That is not to say that the U.S. is not altruistic in any way. On many occasions we have put pressure on regimes that violate human rights, especially when those regimes have very little of value to buy our silence or they have proven hostile to the US and its interests. We also consistently rank in the middle of the pack among industrialized countries in terms of development assistance. Nowhere near the most generous but far from the least generous as well. What this helps illustrate is that there is very little historical evidence that we are the sort of country that has its “good nature” exploited. Then, who is winning in our trade agreements?

Let’s look at NAFTA for instance. Since no one seemed to be harping on about the US-Canada free trade agreement on which it was based, let’s look specifically at the US-Mexico side. As you may have heard in stump speeches, many manufacturing jobs have gone down south to Mexico, with car manufacturing jobs making up a good chunk. Does that mean that Mexicans have come out on top? Well, not really. Although I am sure manufacturing jobs are welcome over there, there is also an incredible amount of competition for them. Compounding the matter is that NAFTA also had the unfair effect of putting Mexican agricultural products up against American subsidized agriculture, with corn being the big one. This caused a slew of Mexican farmers to give up farming, thereby increasing the competition for manufacturing jobs in Mexico and migration to the US. As it stands, the average manufacturing wage in Mexico is $2.40/hr (https://tradingeconomics.com/mexico/wages-in-manufacturing). And in case you were wondering, at that wage you are still struggling and far from middle-class in Mexico. Overall, the average annual real GDP per capita growth rate of Mexico from ’94 to ’13 was 0.9% (http://cepr.net/documents/nafta-20-years-2014-02.pdf). That ranks 18th out of 20 Latin American countries in the same time period.

So, who has benefited from NAFTA? Well, just like in our most nefarious foreign affairs, American corporations have largely been the benefactors. They obviously benefit from moving operations to Mexico and exploiting the cheap labor. They also benefit in the domestic labor market from the leverage that the threat of a move to Mexico provides. In addition, NAFTA allowed some American companies to firmly establish themselves as the top dogs in Mexico into the foreseeable future. This is especially true for industries that are capital-intensive and therefore bear large entry costs. By removing the market barriers to the gorilla next door, Mexico has basically ensured that no company in its private sector will be able to rise as a competitor in the production of high-value goods. Consider that both South Korea and Taiwan ascended into the ranks of modern industrialized countries in the latter part of the 20th century after decades of existence as managed economies with protectionist policies. If they had opened their borders to the US and denied local companies the domestic space to stumble, learn, and then thrive, we would have never heard of Samsung, Hyundai, or Asus.

That is not to say that some Mexicans companies, like Cemex, didn’t profit from NAFTA. It is just that NAFTA benefited large corporations most, and the US has a disproportionate amount of large corporations when compared to Mexico. It also came about an opportune time as many Asian countries were becoming competitive in markets once dominated by the West. The shift of manufacturing operations to Mexico for the auto industry and others may have allowed them to remain competitive with foreign manufacturers.

To sum up, our trade agreements over the last several decades have put Americans first: it is just that they were constructed with the wealthy corporate class of Americans in mind. A slogan more in line with what people want is “American poor, working class, and middle class first”.