Tuesday, March 29, 2016

Eduardo Porter, a reporter for the New York Times, has a think-piece about why NAFTA saved the American car industry.

This article makes no logical sense.

The author admits that the American auto industry lost a third of its workers as Americans competed against Mexicans making one-fifth the wage.

He throws out a huge number of red herrings first:
  • Mexico has a tiny economy compared to the U.S. (so what? Mexico still destroyed a third of all auto jobs in the U.S.)
  • China was worse (so what? the damage to the U.S. auto industry was already done)
  • Devaluation of the peso made it worse (so what? those jobs never came back when the peso rose again)
  • The end of Mexican government subsidies drove down wages in Mexico (so what? it made a bad situation worse)
  • Immigration to the U.S. soared (what does this have to do with anything?)
  • Automakers moved jobs to non-union plants in the American South (so what? we're talking about the 835,000 jobs that left the United States, not shifted regionally)
  • Technological changes to the assembly plant in Korea and Japan killed U.S. jobs (so what? we're talking Mexico)
You have to get to the end of his article before he finally makes a claim that's relevant: The jobs that went to Mexico were the lower-paying assembly-line jobs, while higher-paying engineering jobs stayed in the U.S.

Notice that this is not an argument. His claim is that NAFTA saved the U.S. auto industry. How? In order to make his claim, he would need to say that some nation (Japan, Korea, or even Mexico) was going to take American automaker engineering jobs. But nowhere has that claim ever been made. Nor does he say how shifting low-wage workers in a continental (he uses the term "regional") economy saved those engineering jobs.

He does make the case that automobiles in North America remained cheap enough to compete against Japanese or Korean cars, because the drop in wages achieved by cutting the wages of basic assembly-line workers by 80 percent made American-designed/Mexican-built cars affordable. This, he argues, may have saved the American auto parts industry, whose jobs were not shifted to Mexico.

Interestingly, he provides no reason for why autoparts jobs didn't shift to Mexico. These are basic assembly-line jobs, too. They should have shifted across the border. Why didn't they?

In the end, Porter claims that "jobs were saved" by NAFTA.


His analysis shows that the American auto industry lost one-third of its lowest-paid workers. No jobs were gained. Fewer automobiles were sold, as fewer workers had the income to buy them. American-designed automobiles stayed cheap, but again fewer workers could afford them. Those workers in high-paying jobs were better off, as they had cheaper cars to buy. But as a whole, the nation was worse off.

So how did NAFTA make America as a whole better off? It didn't. And Porter's slip-shod reasoning and red herrings don't make it so.

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