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NAFTA makes this possible. But it's hard for me to see (in this case) the advantage of NAFTA for the USA. There are now 675,000 auto jobs in Mexico. The majori

NAFTA makes this possible. But it's hard for me to see (in this case) the advantage of NAFTA for the USA. There are now 675,000 auto jobs in Mexico. The majority of that production is exported to the USA. How does that help the USA? Do we really make it up in the goods we export to Mexico?

samlevine 10y ago
> How does that help the USA? Do we really make it up in the goods we export to Mexico? We run a trade deficit with Mexico, which can be looked at as arbitrage of the USD as a reserve currency. We pay an IOU and get cars, they give us cars and get a means of parking their money safely. This being said, comparative advantage is a simplistic but not terrible way of looking at international trade in general. Though US workers are more productive at making cars than Mexican workers, they're also more productive at other things and you end up with more net production at some form of equilibrium when the workers that were making cars do something else. Now, the funny thing about auto manufacturing is that the job losses we've seen are all due to automation. We keep making just as many cars, and it's unlikely that we'll ever employ as many people making cars as we used to, because people can only use so many cars at once. Mexico could fall into the ocean and this trend would not change.
sqeaky 10y ago
We can already buy Ford Focuses super cheap. With the amount of competition in the small car market it will only get cheaper. By having the lower priced Mexican labor build the vehicles these can keep getting cheaper without major investment in technology that is unlikely to pay for itself and without reduction in American worker's wages. This also allows American Factories to make higher profits by focusing on making higher margin models without Ford having to give up a market segment. Also, Security is generally better at American plants so by allowing the foreign factories to only build the crap models they are unlikely to compete on the unauthorized manufacturing market. Also, This does put some money and infrastructure into Mexico so we can benefit as their country has slightly fewer people try to cross the border illegally. This is simple division of labor. It lets Americans focus on more profitable things, there is no way this is bad for Americans.
- swyman 10y ago
  > without reduction in American worker's wages. Those jobs would need to be replaced with something paying a similar wage for this to be true. Otherwise you'd move along the demand curve for labor to a point with the same number of total jobs and lower wages paid for each.
  - sjdchid 10y ago
    What are "those jobs" you're referring to? This announcement also includes new models produced in the US and no layoffs as far as I can tell.
ccleve 10y ago
An economist would answer your question by pointing to the theory of "comparative advantage." Here's dry formal description of it: https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage and a somewhat friendlier description: http://www.econlib.org/library/Topics/Details/comparativeadvantage.html http://www.econlib.org/library/Topics/Details/comparativeadv...

samlevine 10y ago

> How does that help the USA? Do we really make it up in the goods we export to Mexico? We run a trade deficit with Mexico, which can be looked at as arbitrage of the USD as a reserve currency. We pay an IOU and get cars, they give us cars and get a means of parking their money safely. This being said, comparative advantage is a simplistic but not terrible way of looking at international trade in general. Though US workers are more productive at making cars than Mexican workers, they're also more productive at other things and you end up with more net production at some form of equilibrium when the workers that were making cars do something else. Now, the funny thing about auto manufacturing is that the job losses we've seen are all due to automation. We keep making just as many cars, and it's unlikely that we'll ever employ as many people making cars as we used to, because people can only use so many cars at once. Mexico could fall into the ocean and this trend would not change.

sqeaky 10y ago

We can already buy Ford Focuses super cheap. With the amount of competition in the small car market it will only get cheaper. By having the lower priced Mexican labor build the vehicles these can keep getting cheaper without major investment in technology that is unlikely to pay for itself and without reduction in American worker's wages. This also allows American Factories to make higher profits by focusing on making higher margin models without Ford having to give up a market segment. Also, Security is generally better at American plants so by allowing the foreign factories to only build the crap models they are unlikely to compete on the unauthorized manufacturing market. Also, This does put some money and infrastructure into Mexico so we can benefit as their country has slightly fewer people try to cross the border illegally. This is simple division of labor. It lets Americans focus on more profitable things, there is no way this is bad for Americans.

swyman 10y ago
> without reduction in American worker's wages. Those jobs would need to be replaced with something paying a similar wage for this to be true. Otherwise you'd move along the demand curve for labor to a point with the same number of total jobs and lower wages paid for each.
- sjdchid 10y ago
  What are "those jobs" you're referring to? This announcement also includes new models produced in the US and no layoffs as far as I can tell.

ccleve 10y ago

An economist would answer your question by pointing to the theory of "comparative advantage." Here's dry formal description of it: https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage and a somewhat friendlier description: http://www.econlib.org/library/Topics/Details/comparativeadvantage.html http://www.econlib.org/library/Topics/Details/comparativeadv...