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Friday, February 3, 2017

NAFTA - Why it is time to re-negotiate the terms.

NAFTA was signed in 1994 by Canada, USA and Mexico.  Prior to that, in 1989, CFTA was signed between Canada and the USA.  Back then, I remember, NAFTA being described as the Free Trade Agreement, and it was promoted as being fantastic for all involved.

As it turned out, it was fantastic for some, and not for all.  It was firstly fantastic for large American corporations, that could start moving their manufacturing and other businesses to Canada (which some had already done under CFTA) and Mexico to attract much cheaper labor.  This was a win for the companies because they could save millions of dollars on labor, and great for Canada and Mexico because they would gain the employees that the USA would be losing.

Large US Corporations, proved just how patriotic they were, and moved out.  I guess they were more patriotic to the dollar than they were to their fellow Americans.  Large companies like Ford, Coca-Cola, Chevrolet, and others too numerous to mention, all fled the high labor costs in the USA.

Along comes Donald Trump.  He has now offered these same companies tax incentives to come back to the USA to put America back to work again.  The exodus from Mexico has begun, and I'm sure Canada will follow.  These large corporations, although being enticed with financial incentives (something they seem to base all decisions on), they are riding on the flag of patriotism.  They are trying to make themselves look patriotic, moreso than greedy.

I spend my winters here in Mexico, and we recently heard about Ford's announcement that they would not be opening their new plant down here, and paying a penalty to the Mexican government for breaking their agreement with them.  People in Mexico are furious at Ford, and many are wondering what will happen to their current Ford product.  They are emphatic, that they will never buy a Ford product so long as they live.  Ford has burned it's bridge back to Mexico.

So where does this leave these corporations leaving cheap labor, and returning home to the USA?  They have now committed to returning, their bridges are burned, and if things happened to turn sour in the USA, they may not have anywhere else to go.  Other cheap labor countries, I'm sure, wouldn't trust them now.  We thought these large corporations were not only rich and powerful, they were smart too.  Of course, recently, companies like Starbucks, and others criticizing Donald Trump are proving this theory wrong.  They appear to be even dumber than their Democrat supporters.

What does Mr. Trump have planned?  It is good to bring back jobs to the American people, but by giving tax incentives to large corporations, it won't take long for negative reactions to their preferential corporate tax treatment.  What does he have planned then?  Wouldn't it be funny, if his ultimate plan was to make promises to get them back and get America working again, then strip the tax incentives away, leaving them nowhere to run.  Not that would be Karma, and with NAFTA no longer available, or at least the NAFTA agreement as signed 20+ years ago, they might just have to stay.