Part 2: NAFTA Statistics Are Half Truths

Free Trade? No such thing! Sir Isaac Newton once postulated that for any action there must be an equal and opposite reaction.

Therefore, for something to be free, it must cost someone an equal amount. There’s a quotation by Robert Heinlein that states “there ain’t no such thing as a free lunch.” To be free of cost is a benefit. But for a cost to be free to a party it must be a cost or detriment to some other party.

For the North American Free Trade Agreement (NAFTA) to be free, it must be a detriment to some other party. The framers of NAFTA would have everyone believe that there are no losers. They claim NAFTA is a win-win for all parties.

Wrong! NAFTA victimizes the workers of each of the three partner nations, i.e., The United States, Canada and especially Mexico. American and Canadian workers are victimized when rapacious corporations decide to relocate manufacturing operations to Mexico. Many of those who work in Mexico are victimized by the foreign corporations who’ve relocated their manufacturing operations to Mexico.

An example is Halliburton who recently was tried in a Mexican Tribunal for its labor indiscretions. The Mexican Supreme Court last year upheld the lower courts two rulings adverse to Halliburton.

For those who want to access the two Halliburton rulings, first go the Mexican Supreme Court website @ http://www.scjn.gob.mx/PortalSCJN/. Next, click on “Actividad Jurisdiccional”, then click on “Jurisprudencia”, then click on “IUS 2006”, and then click on “BUSQUEDA POR NUMERO DE IUS (TESIS).” Next input 182067 or 182068 into the space and press “BUSCAR.” When the synopsis appears, click on the underlined number. Viola!

There’s an adage that states, “figures don’t lie, but liars do figure.” NAFTA statistics have been formulated to characterize what NAFTA proponents want the statistics to represent. Namely that NAFTA is a benefit to all parties. Sir Isaac Newton would dispute that claim. For every winner there must be a loser.

NAFTA proponents claim that the trade between the three nations is up signifying that employment in each of the three countries has increased by the rate the exports have risen. Lofty claim, to bad it’s a faulty claim.

There are some deficiencies in this claim. First, when jobs are relocated from the U.S. and Canada to Mexico, there is an inventory of U.S. and Canadian made materials that follows the jobs from the U.S. and Canada to Mexico. Each American and Canadian worker was processing a list of materials before their job was relocated to Mexico. U.S. and Canadian employment did not increase in order to supply and export those materials to workers in Mexico.

Therefore, a significant portion of the exports to Mexico consists of materials that were supporting U.S. and Canadian workers and are now supporting Mexican workers. The jobs in the U.S. and Canadian suppliers were preexisting to relocation and continue after relocation. There are no new jobs in the U.S. because of increased exports. The only thing that’s changed for the material suppliers is the shipping destination.

Second, a significant portion of the U.S. and Canadian exports consists of “circular non-commercial” transactions. Mexico initiated a program for foreign corporations that wanted to relocate operations to Mexico. The program is called “The Border Industrialization Program.” Euphemistically called “The Twin Plant Program” in the U.S.

The U.S. and Mexican Customs procedures that enabled these programs to exist are called “Temporary In-bond” (TIB) transactions. TIB transactions involve the temporary export of materials from the U.S. and import into Mexico under TIB in order to be processed and then returned to the U.S. to cancel the TIB. The Mexican manufacturer never enters into a commercial contract to purchase the materials. The process is called bailment in the U.S. and comodato in Mexico.

An example would be when a person takes their car to a mechanic for a needed repair. The mechanic makes no commitment to purchase the car. The mechanics only responsibility is to receive the car, perform the agreed upon repairs and return the car to the owner.

But, under NAFTA, the car would be claimed as a purchase by the mechanic for repair and subsequent sale back to the owner. At worst, this is a distortion of the truth and at best a self neutralizing process.

The Border Industrialization Program is also known as the Maquiladora Program. Mexico has implemented a new program entitled Programs of Temporary Importation for Production of Articles for Exportation or PITEX for short. The U.S. and Canadian NAFTA corporations greatly utilize the Maquiladora and PITEX programs.

Both the Maquiladora and PITEX programs put Mexican manufacturers at a disadvantage. The Maquiladora and PITEX companies can import their materials free of any duties and value added tax (IVA). Mexican manufacturers cannot.

When Mexican manufacturers sell their products they must pass along the Mexican duty and IVA costs to the buyer. Articles made under the Maquiladora or PITEX programs are sold from the U.S. to Mexican buyers. The buyers must pay the Mexican duties and IVA directly to Mexican Customs. Mexican manufacturers are forced to prepay duties and IVA and then wait until the finished goods are sold to recoup their costs. U.S. and Canadian NAFTA companies do not usually have to prepay Mexican duties and IVA.

Upcoming postings will provide more in depth revelations pertaining to NAFTA misdeeds. The Halliburton rulings and their implications to NAFTA as a whole will be discussed in detail as will other labor, economic and legal issues.

Meanwhile, Global Trade Watch reveals some related NAFTA misdeeds. Follow the link below in order to become acquainted with more of the deceptions fielded by NAFTA proponents.
http://www.citizen.org/trade/nafta/