Following Up: Lousy U.S. Auto-Making Productivity and Those GM Layoffs

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automotive, Bureau of Labor Statistics, Detroit automakers, General Motors, GM, Jobs, layoffs, motor vehicles, NAFTA, North American Free Trade Agreement, offshoring, productivity, total factor productivity, Trade, Trump, yoFollowing Up

Yesterday, I posted some data – with a special focus on major victim state Ohio and major victim region Youngstown – providing some badly needed perspective on General Motors newly announced manufacturing jobs layoffs in the United States (along with Canada and other unspecified locations). Today I’d like to follow up with some statistics that shed more light on GM’s decision – and the strengths and weaknesses of the American domestic automobile industry.

There’s no doubt that, as widely noted, many trends and developments are responsible for the new job cuts – which are highly unlikely to be restricted to GM alone. Some of the biggest include changing product mixes (away from smaller vehicles and toward larger vehicles), new technologies (for electric vehicles and self-driving vehicles), and the inevitable waning of the latest “automotive cycle” – that is, a slowdown in auto sales that has been entirely predictable following the sector’s strong recovery from a terrifying downturn during the last recession.

But one industry trend that’s been sorely neglected – and that surely bears heavily on the “Detroit 3” auto companies’ failure to continue producing smaller vehicles profitably at their domestic factories (the plants targeted for closure) – concerns its productivity performance. In a word, it’s been lousy – which supports last week’s post presenting evidence that U.S. metals-using industries like automotive have been using crutches like (foreign government-subsidized and therefore artificially) cheap raw materials, along with massive job and production offshoring, to juice their profits rather than efficiency-enhancing improvements resulting from creating new technologies, investing in new machinery, devising better management techniques, or some combination of these measures.

That post last week featured data showing that the American transportation equipment sector (which of course includes auto manufacturing) has performed relatively well during the current U.S. economic recovery and the previous expansion – though the rate of growth decelerated over that time span. These periods were examined because they were marked by a tremendous increase in American imports of steel over-produced and dumped into the United States by foreign producers, which pushed steel prices way down for reasons having nothing to do with free trade or free markets.

But more detailed statistics make clear that the automotive sector per se lately has fared worse when it comes to total factor productivity – the broadest of two measures of productivity tracked by the Bureau of Labor Statistics, and the productivity measure I examined last week.

During the 2001-2007 American expansion, total factor productivity in the motor vehicles sector actually grew faster than that for transportation equipment overall – 22.70 percent versus 13.38 percent. But from the 2009 start of the current recovery through 2016 (the latest available data), vehicle makers’ total factor productivity advanced by only 2.53 percent – that is, much more slowly than the 9.67 percent improvement registered by transportation equipment overall.

In fact, since achieving a huge (15 percent) snapback in total factor productivity during the recovery’s first year following a deep (12.29 percent) nosedive during the recession, vehicle-makers’ total factor productivity fell by 10.94 percent through 2016. As a result, its total factor productivity hasn’t improved on net since 1989.

Also interesting: Since the U.S. ratification of the North American Free Trade Agreement (NAFTA) in 1993 created a bright green light for automotive production and job offshoring, total factor productivity in American motor vehicle-making is up by only 9.20 percent. That’s a considerably slower rate of progress than for manufacturing overall (20.13 percent), even though automotive trade has figured so heavily in U.S. trade flows with fellow NAFTA signatories Mexico and Canada so far.

I don’t mean to minimize the challenges all automotive manufacturers face given the multi-dimensional crossroads that seems to be arriving rapidly for the sector. What should be glaringly obvious, though, is that they’re unlikely to be met adequately – including producing smaller vehicles profitably, especially if and when oil prices start rising again – with a productivity performance that barely qualifies as second-rate.    

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Following Up: Hate Crimes, Trump, and New FBI Data

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African Americans, anti-semitism, FBI, Federal Bureau of Investigation, Following Up, hate crimes, Hispanics, illegal aliens, Islamic terrorism, Jews, Latinos, Muslims, neo-Nazis, Pittsburgh synagogue shooting, racism, Trump, white nationalists, xenophobia

Right after last month’s Pittsburgh synagogue murders, I wrote a post that used FBI hate crimes data to cast doubt on President Trump’s direct or indirect culpability – but closed by noting that the Bureau would soon be issuing numbers that bring the story up to 2017.

“Soon” arrived this week, and the new statistics do provide evidence for a “Trump effect” on hate crimes overall, and on the incidence of anti-semitic hate crimes in particular. At the same time (and I know Never Trump-ers won’t want to see this), much of the evidence is considerably mixed, especially when it comes to the charge that, as presidential candidate and chief executive, Mr. Trump has “activated” violent anti-Semites and other bigots – i.e., he’s emboldened all of them to turn their hatred into attacks on their target groups.

To base my analysis on more data than used in that previous post, I’ve gone back to each of the 2000-2005 years, and continued examining the numbers for each year through 2017. I’ve also looked at two different categories of data that logically shed the most light on these issues – the number of total known incidents for each of these years, and the number of total known offenders. (I also counted up the numbers of victims, but believe that, even though they track well with the other two data sets, they tell us a good deal less about the activation charge. So for brevity’s sake, I’ve left them out.)

The annual figures on total hate crimes incidents typify most of the patterns. The strongest evidence for the Trump effect consists of the changes in the number of incidents and offenders for 2015-2016, and 2016-2017. Recall the Mr. Trump declared his candidacy for president in June, 2015.

Between 2015 and 2016, the incidents figure rose by 4.63 percent, and then jumped by 17.22 percent the following year. The 2016-17 increase was the biggest in percentage terms since that between 2000 and 2001 (a 20.67 percent surge that partly consisted of reactions to the September 11 terror attacks in 2001).

Here, however, is where the activation narrative starts to lose some force. Principally, the 2015-2016 increase was much smaller than that recorded between 2005 and 2006 (7.80 percent). Was then-President George W. Bush unwittingly or not encouraging extremists? Were they becoming activated in opposition to some of his policies, like the Iraq War? The overall hate crimes numbers don’t yield any obvious answers, but clearly among some groups, national tempers were flaring back then.

Another complication: The absolute 2017 number of hate crimes – like the 2016 number – was the biggest in several years. Indeed, 2017’s 7,175 total hate crimes was the highest figure since 2008’s 7,783. But think about that for a moment. It means that the 2008 number was (significantly) higher. So were its counterparts for each year since 2000. Were those years of greater Presidential activation?

It’s tempting to blame a “September 11” effect during those years. Yet the figure for 2000 – the year before the terror strikes – was much higher (8,063) than 2017’s as well.

The offender numbers are even more puzzling from the activation standpoint – since presumably they’re the individuals being activated. They did rise by 14.46 percent between 2014 and 2015 – which covers the first six months of the Trump presidential campaign. But between 2015 and 2016 – when he was running all year and clearly was much more prominent in the national consciousness – the number of offenders actually declined by 2.91 percent.

The following year, Mr. Trump’s first in the Oval Office, offender numbers shot up again – by 10.40 percent. That increase, however, wasn’t that much larger in percentage terms than the rise during the Barack Obama year 2012-2013 (9.06 percent).

Further, looking at the makeup of these numbers (in terms of the target groups) produces even bigger mysteries. Specifically, that big 17.22 percent increase in the total number of hate crimes between 2016 and 2017 was keyed largely by a 37.13 percent jump in incidents targeting Jews. Consequently, the 2017 total reached 938 – the highest figure since, again, 2008 (another George W. Bush year). But as with overall incidents, this means that the 2008 figure (1,013) topped that for 2017 by an impressive margin. In addition, the 2017 total was exceeded no less than six times in all between 2000 and 2008.

More puzzles emerge from the offenders figures. The number targeting Jews increased 8.79 percent between 2015 and 2016, and by 24.23 percent between 2016 and 2017. The absolute numbers for those years (421 and 523, respectively) are also the two highest during the 2000-2017 period. So these figures also seem to bear out the accusation that President Trump has coddled neo-Nazi/”white nationalist” types in various ways and bears some responsibility for their crimes.

But leave aside the objections that Mr. Trump has welcomed Jews into his family, has worked with them in numerous ways during his business career, and has been a staunch supporter of Israel (all of which has enraged some of those neo-Nazis). Why did the numbers of anti-semitic perps skyrocket by 69.40 percent between 2012 and 2013?

Something else that doesn’t dovetail with the activation charges: Although candidate and President Trump have been accused of stoking racism and xenophobia along with anti-Semitism, the data indicate that any Trump effect in regard to African-Americans and Muslims has been much more muted.

The number of incidents figures show that reported hate crimes targeting Muslims nearly doubled between 2014 and 2015 (from 154 to 294), and then climbed by another 21.77 percent the following year. Maybe candidate Trump’s calls for a ban on Muslim immigration into the United States and for registering Muslims in a national data base deserve lots of blame? Possibly. But then why would anti-Muslim hate crimes have dropped by 7.54 percent in the President’s first year in office – when the Muslim ban effort was a top priority, and front-page news, for months.

Moreover, despite the belief that Mr. Trump’s support of “birther” claims against former President Obama, and a 7.65 percent increase in hate crimes against blacks between 2014 and 2015, these numbers have stayed virtually flat over the course of the President’s main campaigning year and his first year in office.

Evidence for Trump-ian activation that’s more compelling comes from the data on anti-Hispanic hate crimes. The numbers of incidents and offenders both rose strongly – by a record 42.73 percent for the former and by 29.21 percent for the latter between 2016 and 2017, when the President kept immigration issues front and center. As with so many of the other statistics, however, the latest absolute Trump Era numbers for both categories remains way below many pre-Trump annual levels.

That’s why it seems reasonably clear to me that the main driver of the hate crimes data isn’t presidential activation, and that it may not be a major influence at all. What are some possible alternative causes? In many cases, real world events. Two examples: First, the numbers of anti-Muslim hate crimes and violent haters arguably rose so robustly from 2014 on because that period has been marked by a shocking number of fatal terrorism strikes launched by Islamic extremists in both the United States and in Europe.

Second, the anti-Hispanic counterparts of these figures were so much higher during the previous decade than they are today because those years featured mounting efforts by the Open Borders lobby – including an unprecedented wage of protest and other forms of activism by illegal immigrants themselves – to demand more rights and government benefits for this illicit population.

This explanation doesn’t seem to apply to the levels and growth rates of anti-semitic hate crimes. But then again, this form of bigotry isn’t often called “the oldest hatred” for nothing. (Racism of course has been an historical constant as well in America and elsewhere.) 

It should go without saying (but maybe not in these highly charged and polarized times) that none of the events and developments cited immediately above can ever justify hate crimes or similar bigoted actions and beliefs. Nor does it signal a belief that the President has handled these incidents on his watch acceptably. As I’ve written repeatedly, he hasn’t. But what should be clear is that anyone seeking to understand anti-semitic and other hate crimes needs to look far beyond the White House.

Following Up: Trump and Hate Crimes: What the Data Say

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African Americans, anti-semitism, bigotry, Following Up, hate crimes, Hispanics, Jews, Muslims, Pittsburgh synagogue shooting, political violence, racism, Trump, whites

If you’re one of those who believe that hate crimes against Jews and other religious or racial or ethnic minorities in America have reached unprecedented levels, and that President Trump’s too often offensive rhetoric is solely or even mainly responsible, here are some numbers to consider:

5,938

5,446

4,869

4,563

4,461

4,200

4,150

4,862

These numbers represent the FBI’s figures on the annual number of reported religiously, racially, and ethnically motivated hate crimes in the United States in the year 2005, and then annually from 2010 through 2016. The FBI won’t be reporting its 2017 results for at least a few more weeks, but these statistics indicate that the incidence of such transgressions has been falling recently, not rising. (I chose these years assuming that, by 2005, much post-September 11 anti-Muslim and anti-Middle Easterner sentiment had cooled, and then listed annual numbers in 2010 because that’s our last beginning of a decade.)

It’s true that there’s been a major rebound between 2015 and 2016, and that Mr. Trump declared his presidential candidacy in June, 2015. So maybe that accounts for the increase? Possibly. But then how to explain the considerably higher numbers in 2005 and 2010 – and the slightly higher number in 2011? Were dog whistlers occupying the Oval Office then?

Blame-Trump efforts look even weaker when the makeup of the 2015-16 increase is examined. Here are those data, by reporting/victim group, along with the statistics for the previous year’s change, to provide some context:

percentage changes                         2014-15                   2015-16

blacks                                                -0.09                          0.86

whites                                                 7.64                        15.21

Jews                                                    6.87                       17.92

Muslims                                          107.43                       26.38

Hispanics                                           -9.26                       23.21

In other words, a case can be made that Trump rhetoric played some role in prompting a significant number of hate crimes against Jews, Muslims, and Hispanics. But the President is widely accused of being a racist, too. Why, then, was there virtually no change in the incidence of hate crimes against African Americans? The rate of increase in hate crimes against whites, moreover, nearly doubled. What’s up with that? And although the numbers of such offenses against Muslims rose strongly between 2015 and 2016, they rose at more than four times faster the previous year – in fact, more than doubling. Did more extremist bigots decide to tune in to Mr. Trump on Hispanics between 2015 and 2016, as opposed to his Muslim remarks? And if so, what could explain that development?

Saturday’s Pittsburgh synagogue shooting justifies a special focus nowadays on hate crimes committed against Jews, so here are the FBI figures for reports of such incidents for 2005, and annually between 2010 and 2016:

976

1,040

935

836

737

684

731

862

These results provide some support for claims that Mr. Trump’s emergence on the political scene inspired some of the nation’s worst anti-semites to crawl out from under their rocks. But they also show that the Jewish-focused alt-right/neo-Nazis etc were significantly less activated in 2015 and 2016 than they were in 2005 or 2010. And of course, the overall U.S. population grew during that period.

Further, it’s easy to reach similar conclusions from this list of years, starting in the twentieth century, that have seen acts of actual violence on American Jews themselves (as opposed to, e.g., synagogue vandalism or verbal harassment):

1915

1958

1960

1977

1984

1985

1986

1991

1994

1999

2000

2009

2014

2018

The source is The Atlantic Monthly; I’ve added the 2000 Pittsburgh murder that I described in yesterday’s post which the magazine for some reason omitted. Although numbers like this per se can’t convey casualty counts and other qualitative measures of lives lost or individuals wounded or fear induced, there’s no support here for the idea that American Jews should feel less safe now than ever before. In fact, the worst decades look like the 1980s and 1990s. (Keep in mind that actual casualty levels don’t necessarily reveal the virulence of an attack.)

It’s certainly possible that the FBI’s upcoming 2017 data could show a big jump in various types of reported hate crimes, and that a Trump effect will be lot clearer (depending, again, on the makeup of the increase). Until then, however, the charges that Trump-ian dog whistles are the big reason for record (at least in modern times) threats to American minorities of all or even many kinds will be sounding an awful lot like dog whistles themselves.

Following Up: More Evidence of Hollywood Immigration Hypocrisy

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2018 elections, Better Call Saul, celebrities, crime, entertainment industry, Following Up, Hollywood, illegal aliens, Immigration, Media & Society, midterms 2018, Norman Lear Center for the Study of Entertainment, OMG WTF, television, Trump, University of Southern California

If America’s entertainment industry has made anything clear since President Trump’s run for the White House began in mid-2016, it’s that it detests the chief executive, and that his stance on illegal aliens and immigration more generally is one big reason why. .

That’s why I wrote with such astonishment last month about Hollywood’s failure to come down like a ton of bricks about the popular cable dramedy Better Call Saul – whose portrayal of Latinos in New Mexico seems taken straight out of Mr. Trump’s campaign launch speech describing many illegal aliens as criminals, rapists, and (especially relevant for Saul) drug dealers.

Yesterday, however, my jaw dropped further when I came across a report finding that Saul was anything but an anomaly. According to a study just put out by the University of Southern California’s Norman Lear Center for the Study of Entertainment, Media & Society (what a mouthful!) American television overall presents a significantly distorted and misleadingly negative picture of immigration and immigration issues.

And prominent among these alleged distortions: “Immigrants are disproportionately associated with crime and incarceration on TV.”

More specifically:

“On TV, one-third (34%) of immigrant characters were associated with a crime. This does not match reality. 2018 studies by the CATO Institute and the Marshall Project both reiterate what several other studies have found: both undocumented populations and immigrants as a whole commit less crime than native-born Americans.

“Eleven percent of TV immigrants are associated with incarceration. This means there was either a reference to a previous incarceration, they are currently incarcerated or there is a reference to a future incarceration. This is substantially higher than the less than 1% of foreign-born people incarcerated at the state and federal level in the U.S., excluding immigration offenses, according to the CATO Institute.”

In this post, I’m not going to get into the debate over whether legal immigrants or, more important, illegal aliens, commit crimes to a greater or lesser degree than native-born Americans. (Here’s my take on the subject.) Rather, the main point here is that, as actors and comedians and talk show hosts focus on demonizing President Trump for cruel, unfair, racist, fascistic, and xenophobic immigration policy priorities, they’ve apparently been working in an industry that’s vigorously propagated the very stereotypes they say they abhor (and not just on crime, but on immigrant education levels, poverty rates, and legal status).

Entertainment industry figures recently started a political action committee named OMG WTF to support Democratic political candidates in key states in next month’s midterm elections. As the Lear Center report reminds, that acronym obviously also applies to Hollywood’s hypocrisy about immigration.

Following Up: Woodward’s Globalist Bias

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Alan Greenspan, Bob Woodward, economists, establishment, Fear, Financial Crisis, Following Up, globalism, Mainstream Media, manufacturing, North Korea, nuclear weapons, Robert Costa, South Korea, steel tariffs, Trade, Trump, Washington Week

I’m a long-time admirer of Bob Woodward, and so it’s disappointing to say the least that he’s just provided more evidence that his sensational (literally) new book Fear is as much of a Hail Mary to restore the (deservedly) shredded reputation of the nation’s bipartisan globalist policy establishment as an effort to portray “the real inside” story of the President Trump’s White House.

At this point, I should confess that I still haven’t read the book. But enough of it had come out through about a week ago that I felt justified in analyzing Woodward’s treatment of Korea-related trade and security issues and arriving at the above conclusion. The new evidence comes from the long-time Washington Post reporter’s interview this past Friday night on PBS’ Washington Week talk show, so it seems as an equally sound basis for judging Woodward’s thinking.

Korea issues again come into play, but so does the President’s recent decision to impose tariffs on most of the foreign steel attempting to enter the U.S. Market. Let’s look at Woodward’s assessment of the steel situation first.

The author’s first problem with the levies is his belief that they represent an instance of Mr. Trump’s alleged habit of “just [doing] what he wants; and he’ll listen up to a point, then he will dismiss….” This disquiet is easily dismissed itself, as it sounds like the President seeks advice from his advisers and then, after a finite period of time, decides what course he’ll take. What does Woodward think Mr. Trump is supposed to do? Listen indefinitely? Or until he’s convinced he’s wrong?

But the Woodward’s second problem with the steel tariffs is much more revealing of his own blinders – and therefore much more disturbing. Here it is:

“Now, if you took a thousand economists and say do steel tariffs make sense – and I quote a document in the book where experts on the left, the right, the economists, Nobel Prize winners, Alan Greenspan, Ben Bernanke, leading Democratic and Republican economists, send him a letter saying don’t do this; this will not work.  And, of course, he does it….

“But now we are in the world of these trade wars, which he says he thinks he can win.  Wow.  Danger, danger.”

In other words, Mr. Trump’s great crime is failing to listen to the supposed experts. I say “supposed” because the two he mentioned specifically – former Federal Reserve Chairs Alan Greenspan and Ben Bernanke – have little enough claim to minimal competence in their own economic specialty, monetary affairs. The former spearheaded the disastrous monetary and regulatory policies that helped trigger the world’s worst financial crisis and depression in decades. The latter was caught with his pants below his ankles when the crisis struck, and “solved” it by flooding the economy with so much new credit that it was bound to stay afloat. You needed a Ph.D. to pretend that money “does grow on trees”?

But according to Woodward, the President should have followed their recommendations on trade policy, about which they have no special credentials? For good measure, Greenspan knows about as much about manufacturing industries like steel as Hillary Clinton knows about winning presidential elections. After all, he’s the genius who once referred to manufacturing as “something we were terrific at fifty years ago,” and “essentially a nineteenth- and twentieth-century technology.” So please, Mr. Woodward, spare us the experts worship.

By contrast, Woodward’s latest Korea example warrants more concern about the President’s competence on the job and knowledge of the issues – but unwittingly exposes the status quo as just as worrisome. Woodward had reported that last December, Mr. Trump wanted to tweet that the dependents of the 28,000 U.S. troops stationed in South Korea would be evacuated. The problem with this tweet? In th author’s words:

“[J]ust at the time, the top North Korean leader had sent a message through intermediaries to H.R. McMaster, the national security adviser, on December 4th of last year saying if you start withdrawing dependents, we will take that as a signal that war is imminent.  Now, you have a volatile leader, Kim Jong-un.  He’s got these nuclear weapons and there’s no predictable path for understanding how he might respond.  And the Pentagon leadership went nuts about this and just said, you – and the tweet never went out, but had it, you know, God knows.”

If you actually start thinking about the Korea crisis, however, you recognize that the current situation is even more dangerous. For as I’ve repeatedly written, these U.S. forces are deployed to South Korea not to help South Korean forces repel a North Korean attack. They’re deployed to South Korea to serve as a tripwire whose impending defeat will create overwhelming political pressure on an American president to save the day by using nuclear weapons. And the presence of these soldiers spouses and children is being counted on to make this pressure completely irresistible.

As I’ve also written, when North Korea was unable to strike American territory with nuclear weapons of its own, this strategy arguably made sense. For the nuclear threat was likely to succeed in preventing that North Korean attack in the first place because carrying it out pose no risk to America’s core security.

Now, with the rapid recent (and apparently continuing) development of North Korean nuclear forces capable of reaching North America, those days of U.S. invulnerability are unmistakably nearly over, and the American troops’ presence in South Korea are putting U.S. cities in the line of nuclear fire. Worse, they are the only recognizable source of this danger – unless you believe that North Korea has a reason to launch an unprovoked nuclear attack on the United States, and sign its literal nuclear death warrant.

In other words, because the Korean peninsula remains such a powderkeg, and because the North’s leaders are so little known and unpredictable, the danger that Woodward’s Pentagon sources allegedly are so terrified President Trump might have created exist right now, have existed ever since North Korea’s progress toward producing nuclear weapons platforms with intercontinental capabilities became known, and will continue to exist as long as Mr. Trump keeps following the Pentagon’s advice and keeps any American military presence on the peninsula.

Ironically, moreover, the best guarantee of preventing a North Korean nuclear warhead from landing on American city or two is for the President to follow his instincts, pull the troops and their dependents out, and let the local countries take the lead in dealing with North Korea’s nuclear ambitions.

Something else disturbing about the Woodward Washington Week interview: Anchor the clear reverence for the globalist Washington establishment demonstrated also by the show’s moderator, Robert Costa, who, like Woodward, works for the Washington Post. It came through when Costa told Woodward that what most surprised him about the book was “the effort that’s being made by so many people around him to bring him back into the mainstream, back towards certain norms.” It came through in his reference to “keeping President Trump in line” and “keep Trump moving toward the center.” And it came through in his question to Woodward,

“Do the people around [Trump] who are taking documents off of his desk, different trade agreements the president’s trying to rip up, do they see themselves, when you talk to them, as heroes?  Or do they know they are, in a sense, mounting, as you call it, an administrative coup d’etat?”

What Costa, Woodward – and so many other Mainstream Media journalists – need to understand is that the “norms” reportedly being protected in Woodward’s book aren’t the Ten Commandments or any other code of decency, justice, or democracy. The administration officials reportedly defying the President’s wishes aren’t some modern collective embodiment of Moses. And the center isn’t ipso facto the location of policy wisdom, or even sanity.

Instead, the norms are positions developed by flawed and often self-interested human beings. More specifically, the administration’s Never Trump-ers could also be motivated by simple desires to protect and restore the positions of power, privilege, and wealth their kind enjoyed almost unchallenged until the Trump Revolution. And fetishizing the center amounts to judging these positions only by their relationship to other alternatives that may be widely voiced but also equally off-base, not by their relationship to realities on the ground.

That is, Woodward’s globalist sources for Fear need to be scrutinized just as thoroughly as the President they oppose – especially since their often catastrophic failures did much to put Mr. Trump in power. You could even write a book.

Following Up: Still Lots of Unanswered Questions About that Trump NAFTA Revamp

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auto parts, autos, Canada, domestic content, Following Up, Mexico, NAFTA, national security, North American Free Trade Agreement, rules of origin, Trade, Trump, World Trade Organization, WTO

In recent days, the Trump administration has reached a trade deal with Mexico that either may or may not fundamentally rework the North American Free Trade Agreement (NAFTA). I say “may or may not” because above and beyond the question of whether the third NAFTA signatory, Canada, will actually go along, and whether Congress will agree to consider a bilateral as opposed to a trilateral deal, some of the most important provisions of the bilateral U.S.-Mexico pact remain unknown to the public.

In particular, it’s completely unclear what the United States and Mexico have agreed to regarding the rules of origin for automotive products traded within the NAFTA zone. In fact, it’s completely unclear whether what they reportedly have agreed to is an agreement at all.

To remind: The rules of origin specify how much of a product (in this case, most motor vehicles as well as all automotive parts) needs to be made inside North America in order to qualify for tariff-free treatment when its sold in any of the signatory countries. The idea – totally reasonable, in my opinion – is to make sure that as many of the benefits of a trade deal as possible flow to the signatories (which of course, legally need to incur all of the obligations) and don’t leak out to non-signatories (which of course legally need to incur none of the obligations).

Automotive trade is crucial in this respect because vehicles and parts combined last year made up nearly a third of all U.S. merchandise imports from Mexico, and (revealingly) 9.65 percent of the considerably smaller amount of U.S. goods exports to Mexico.

As I’ve repeatedly observed, the original NAFTA failed to achieve this objective. And the main problem was not the level of North American content required for duty-free treatment (62.5 percent). The main problem was that the penalty for ignoring the rules was so negligible (a 2.5 percent tariff). And it appears that even though the content requirement has been increased (to 75 percent), the meager penalty remains. Reportedly, it’s also the only obstacle to automakers ignoring the new requirement that 40 to 45 percent of a vehicle be made by workers earning at least $16 per hour.

So it’s entirely reasonable to finish most news accounts and conclude that the new U.S.-Mexico treaty will do little to achieve its stated goal of inducing automakers based outside North America to move production and jobs inside North America.

Complicating matters, though, are some wrinkles in the U.S.-Mexico deal that have been reported in the days since the agreement was first announced. Principally, according to some news accounts, much higher 25 percent tariffs will be imposed on vehicles assembled in Mexico and sent to the U.S. market once the number of those vehicles exceeds 2.4 million. Therefore, the actual automotive rules of origin may well have been genuinely toughened.

Nevertheless, for several reasons, this conclusion, too, needs to be qualified. For Mexico exported only 1.8 million passenger cars and sport-utility vehicles to the United States last year. So its sales would need to rise considerably before that genuine toughening kicks in. Second – and again, reportedly – this provision of the agreement is contained in a side letter. The apparent failure to include it in the core text of the agreement raises questions about its enforceability – especially since the same reports indicate that under it, Mexico retains the right to challenge those higher tariffs at the World Trade Organization (WTO). Moreover, I’ve seen absolutely nothing about any quotas for imports of auto parts as such from Mexico – which are currently running at an annual rate topping $16 billion.

That could actually be good news for the United States – because the auto tariffs (again, reportedly) would be based on the U.S. trade law that authorizes Washington to impose levies based on national security considerations. Such trade curbs are legal under WTO rules because the creators of even this sovereignty-impinging arrangement recognized that no major powers would ever surrender their right to assess and act on their national security interests. It’s plausible, therefore, to believe that today’s WTO majority would shy away from challenging this kind of decision by Washington, however damaging it might be to their exports, for fear of provoking a U.S. walkout and thus the organization’s demise.

But there’s no guarantee of this outcome – especially if or when a more WTO-friendly administration replaces Mr. Trump’s in Washington.

It’s true that an eventual Trump decision to impose lofty national security-justified auto tariffs on non-North American auto-makers would render many of these questions moot – because even if Mexico was exempted, and those companies therefore could keep supplying the American market through that channel, they’d quickly run up against the quota (assuming of course that one exists).

Yet this auto tariff decision seems to lie pretty far down the road. In the meantime, the NAFTA decision continues to look pretty confusing. I’m just hoping that this post will make your confusion a little more informed.

Following Up: Why Auto Tariff Alarmism Just Got (Even) Sillier

Tags

automotive, autos, CNBC, consumers, Following Up, prices, Rick Santelli, tariffs, Trade, Trump

The claims just keep coming that President Trump’s threatened auto tariffs will cause vehicle makers to boost the prices paid by American consumers per vehicle by thousands of dollars. So does the evidence that such claims are “horse hockey” – to quote a memorable euphemism for “baloney” recently used by CNBC’s Rick Santelli (in a similar context).

As I noted in a post last Wednesday, this alarmism flies in the face of recent U.S. auto sales trends – which recently have been weak enough to force the companies to offer deep discounts to prop up their numbers and try to keep market share. As I’ve also noted, those trafficking in price hike fears either know nothing about business, or are trying to fool their audiences. For although producers’ costs of course influence consumer prices, the latter’s main determinant is what the former believe the market will bear. To believe otherwise is to believe that companies aren’t striving to maximize revenues and profits wherever and whenever possible. And by extension, it’s logically to believe that, although auto makers don’t believe their customers will pay those higher prices today, they’ll change their tunes as soon as vehicles become much more expensive.

Which brings us to the newest evidence – yesterday’s data on U.S. auto sales for June and for the first half of the year. Overall, they were up, and up nicely (especially for last month, when they rose year-on-year). But as always, you need to look under the hood. (Couldn’t resist!) And that’s when you encounter vital contrarian details provided by analysts at Cox Automotive.

According to the Associated Press’ coverage of their conclusions, the increases were driven by “low-profit sales to fleet buyers such as rental car companies, and retail sales to individual buyers were propped up by rising incentives such as rebates and subsidized leases.”

Indeed, said observed one Cox consultant, “Retail sales have been flat, and even those sales have been supported by incentives being up 6 percent.”

Does this sound like a market where big, sudden price increases have much chance of sticking? If you agree, I’d be happy to show you a bridge in Brooklyn that’s available for a song. And if you’re parroting this line, chances are you’d be a great used car salesman.

Following Up: My Maryland Hometown Approves Non-Citizen (Including Illegal Immigrant) Local Voting

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Aaron Faulx, citizenship, democracy, diversity, Following Up, illegal immigrants, illegal immigration, immigrants, Immigration, Maryland, Pledge of Allegiance, Riverdale Park, voting

Monday night, the monthly legislative meeting of my hometown Riverdale Park, Maryland’s Town Council started off, as usual, with the pledge to the flag. A little less than two hours later, the Council voted 4-2 (with one abstention) to extend local voting rights to two categories of non-citizen residents (illegal and legal immigrants), and to 16-year olds to boot.

As RealityChek readers know, I wasn’t surprised by the final result – although the margin of defeat was narrower than I expected. Still, especially in light of the Pledge of Allegiance recited solemnly by Council members supporting this amendment to the Town Charter, and their backers in the audience, the voting decision was a (vigorous) head-scratcher. For it raises the most profound questions about to what exactly those in favor of non-citizen voting are vowing their loyalty.

As I wrote in that previous post, this form of voter expansion is completely inconsistent with arguments made – and with good reason – throughout American history since the era of the Founding. These arguments have held that a successful democracy cannot be created or maintained unless it’s based on a community of deeply shared ideas about democratic governance. In turn, it’s impossible to preserve this community and allow significant immigration flows unless newcomers receive extensive exposure to these values. Hence longstanding requirements that voting on the federal level be restricted to citizens, and that the naturalization process take several years. (As explained also in the post, the Constitution empowers the states to set election rules within their borders, and both historically and currently, some have decided ignore these claims and to permit non-citizen voting.)

Instead, the new Riverdale Park voting eligibility criteria specify that an applicant be a resident for a mere 45 days. Of course, even this threadbare requirement will be difficult at best to verify for illegal immigrants (along with their very identities). And it is utterly far-fetched to suppose that these verification goals can be achieved adequately with same-day registration of these voters.

But just as important, a 45-day local resident who could well have crossed the U.S. border not long beforehand cannot possibly be well-versed enough in the nation’s democratic values to qualify for the franchise – which is after all a right to make decisions with long-term implications for the community’s well-being. As for non-citizen legal U.S. residents, they either have not been present in the United States long enough to pass the national tests for citizenship (which include a five-year residency requirement), or they have chosen not to become citizens – and therefore join the national democratic community.

Is there any reason, however, to believe that the national residency requirement is inappropriate to apply on the municipal level? If so, none of the supporters of Riverdale Park voter expansion has mentioned it, and there’s no evidence that the subject even came up in discussion of the proposal among Council Members.

I sent my RealityChek post on the subject to all the Town Council members before the vote. Only two replied, and neither of them supported the amendment. In fact, I’ve only seen a single reference to the subject of a community of beliefs – in a lengthy and largely emotive ramble on non-citizen voting published by my Council Member, Aaron Faulx, in the April issue of the Riverdale Park government’s official bulletin. According to Faulx, “Our shared beliefs need to evolve toward inclusivity and engagement.”

He didn’t explain what he believes comprises these shared beliefs currently, much less why they’re flawed. But the shared beliefs he prizes are hollow at best and dangerously inadequate at worst. “Inclusivity” per se, after all, says nothing about substance. As a result, it seems to assume that even individuals who actively oppose each others’ most fundamental political and even philosophical principles can for any significant period of time work together to promote any version of common well-being – much less one bearing any resemblance to that which has served the nation so well for so long, though of course not perfectly. How on earth can that work? The only reasonable answer is, “It can’t.”

And if inclusivity per se (and its logical follow-on, “engagement”) cannot be treated as absolutes, then they inescapably need to be supplemented with some form of content. And just as logically, it can’t reasonably be assumed that those  unfamiliar with this content (through usually through no fault of their own to be sure) can instantly or quickly become familiar once they enter any political community – national, state, or local – from the outside. Some period of orientation – i.e., assimilation – is essential. And on a more practical level, some effective way of determining that the assimilation process has been completed is essential.

Reasonable people can disagree on the specifics of all of these procedural standards. But what is thoroughly unreasonable is insisting that they, and the institution of citizenship that necessarily incorporates considered procedural and substantive considerations alike, be dispensed with in the name of a mere shibboleth – whether “inclusivity” or its cousin, “diversity” – that has in and of itself has no organizational capabilities whatever. Even sadder is the seeming refusal of the “inclusivists” to recognize or admit that these related concepts of citizenship and voting rights have for decades (not long enough, to be sure!) been available totally irrespective of race, gender, or ethnicity.

So no wonder I found these “inclusivists’” recitation of the pledge to the flag Monday night so utterly ironic, and indeed bizarre – and why you should, too. For their stated views can only logically mean that they’re pledging allegiance not to a national political community worthy of the name, but to a certain tract of land and whatever agglomeration of individuals happens to be occupying it at any given moment. Why even continue to bother?

Following Up: More on the Trump Tariffs

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aluminum, Australia, Canada, David J. Lynch, Defense Department, defense manufacturing base, downstream industries, European Union, Following Up, George W. Bush, Gordon Hanson, James Mattis, Kentucky, manufacturing, Mitch McConnell, multiplier, Paul Krugman, Paul Ryan, steel, steel-consuming industries, tariffs, terrorism, The New York Times, Trade, Trump, U.S. Business and Industry Council, United Kingdom, Washington Post, Wisconsin

I could spend all day today rebutting ignorant, biased, and simply inane commentary on President Trump’s Thursday announcement that stiff tariffs will be imposed on U.S. imports of steel and aluminum (along with watching the plethora of college hoops on TV today!). Instead, I’ll offer some follow-on thoughts to the tariff talking points I posted yesterday.

>The European Union in particular seems outraged by the Trump decision, and has threatened to retaliate with tariffs on its own on a wide range of products, including some from Wisconsin and Kentucky. These of course happen to be the home states of House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. It’s an understandable, and certainly clever, impulse, and in 2003, something like it succeeded in convincing former President George W. Bush to lift steel tariffs he had imposed 18 months earlier.

Of course, Bush 43 was no Trump. He was a committed free trader and globalist, and/or agent of of America’s powerful corporate offshoring lobby. But here’s something that needs to be considered by Messrs Ryan, McConnell, and other lawmakers at whom the Europeans or other powers may take aim: What if, shortly after September 11, Osama Bin Laden had threatened to destroy major targets in their home states or districts unless the United States withdrew militarily from Afghanistan and left him alone. Would the affected legislators have run to the White House to plead for an abandonment in the war on terror? Not likely.

I know that war and economics are different (although given the importance of economic strength as a source of military strength and overall national success, the similarities and overlap are widely overlooked). But don’t doubt for a minute that American politicians’ reactions to these European threats will be watched closely in all the world’s capitals, and that signs of weakness will be factored into foreign decisions to abide by or violate current trade agreements at the U.S.’ expense, or take other measures to gain advantage in their own, American, or third-country markets that clash with free market and free trade norms.

So here’s hoping that American Members of Congress and Senators will show some backbone, and make clear to the nation’s trade partners that they won’t permit themselves and the country at large to be hanged separately.

>Speaking of hanging separately, quite naturally, U.S. steel- and aluminum-consuming industries are concerned that their global competitiveness will be harmed if they’re forced to use more domestic metal in their products. They need to keep two considerations in mind. First, if foreign governments are permitted by Washington’s inaction to dump major American industries like aluminum and steel out of existence, consuming sectors would be next in line. 

Second, there is indeed no inherent reason to make the consuming industries pay any penalty at all. When I was at the U.S. Business and Industry Council, which represented many steel-consuming companies and industry groups, we persuaded them that the best solution would be tariff protection for them as well. The tariff complaints coming from such sectors today reveals that the Trump administration hasn’t put this possibility on the table. That’s a major missed opportunity, and the President should realize that such offers not only can build support for the steel and aluminum tariffs. They can also expand the constituency for broader America First trade policies. (New Trump statements on possible auto tariffs make clear exactly the types of steps needed, although as is usually the case, they work best when applied across-the-board.)   

>Speaking of missed opportunities, here’s another (big) one – the handling of some allied countries’ indignation about being treated as threats to America’s national security because of their steel and/or aluminum shipments. In several major cases, these complaints could have been prevented had the administration recognized that Australia, Canada, and the United Kingdom are defined by American law as part of the nation’s defense “technology and industrial base.”

I’m not necessarily a supporter of this policy, but since it exists, these countries have an entirely legitimate point regarding their possible inclusion in the metals’ tariff regime. And the Trump administration should have explained to them that they were of course being exempted. Moreover, the Defense Department should have told the rest of the administration about the legal and legislative situation. Yet Pentagon chief James Mattis’ memo to his administration colleagues outlining his department’s position on the tariffs never mentioned it.

Not that these allied countries are entirely blameless for the row. They could have raised the issue when the prospect of sweeping U.S. tariffs was first raised. But all indications are that they preferred to grandstand.

>As should now be expected, the media coverage of the tariff controversy has often veered off into economics and policy La-La Land. Two of the funniest examples I’ve seen so far (and they’re nearly identical): criticizing the announced tariffs because they only boast the potential of bringing back high-value manufacturing to the United States instead of lots of industrial jobs.

Think I’m kidding? Here’s Washington Post correspondent David J. Lynch: “If tariffs prompt companies to move production back to the United States, they would likely opt for highly automated plants that require fewer workers. Trump’s tariffs ‘would bring back 21st-century factories where we lost 20th-century factories,” [economist Gordon] Hanson said this week at the National Association for Business Economics conference in Washington.”

Here’s no less than Nobel Prize-winning economist and New York Times columnist Paul M. Krugman: “[T]he tariffs now being proposed would boost capital-intensive industries that employ relatively few workers per dollar of sales; these tariffs would, if anything, further tilt the distribution of income against labor.”

What both authors are somehow missing is how manufacturing is valuable for much more than high wage employment. It’s long been the nation’s leader in productivity growth. It generates nearly 69 percent of private sector American spending on research and development. And don’t forget its high employment and output multipliers – which mean that each dollar of manufacturing output punches far above its weight in generation production and jobs elsewhere in the economy.

That last point is particularly relevant to Krugman’s claim about labor’s low share of national incomes. The manufacturing employment multiplier tells us that adding to industry in America – including capital-intensive industry – will promote employment in related sectors like logistics, plus revitalize the retail and other service sectors of the towns and cities and counties where the new factories are built. Those jobs may not pay as well as the manufacturing jobs lost. But they’re sure better than the economic death that often results when communities lose their factories.

Following Up: A Big China-Related National Security Hole May Get Plugged, and Trade Derangement Syndrome Keeps Spreading

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CFIUS, China, Committee on Foreign Investment in the United States, consumers, East Asia-Pacific, Following Up, foreign direct investment, LG Electronics, manufacturing, Samsung, South Carolina, tariffs, technology, Tennessee, Trade, washing machines

Yesterday alone produced a news item that provides important grounds for hope that America’s policy toward China might finally be getting coherent, and one that shows that Mainstream Media coverage of international trade issues remains almost determinedly brain-dead. And conveniently, both items concern developments recently reported on by RealityChek.

The first came in The Wall Street Journal, and describes some important new provisions in legislation proceeding through Congress that would update the federal government’s standards for approving or blocking prospective foreign proposals to take over U.S. businesses with defense-related implications. The current process for screening such investment enables Washington to nix (and this is just an obvious hypothetical example) a Russian or Chinese proposal to buy a company that makes jet fighter craft.

Most cases examined by the inter-agency group that makes recommendations to the President for final action (the Committee on Foreign Investment in the United States, or CFIUS) aren’t such easy calls, which is precisely why lawmakers seem determined to expand the grounds for blocking potentially dangerous takeovers. That’s an idea I’ve long favored.

But at least as important is a provision in the bill that addresses a problem I’ve written on, but that Washington has been slow to recognize – even under the Trump administration. That’s the growing tendency of American technology companies to share their best knowhow with partners in places like China. In some cases, the U.S. firms voluntarily hand over the keys to these kingdoms. In others, they invest capital in Chinese start-ups and other ventures.

It’s true that the United States maintains a system for controlling exports of national security-related technology to problematic countries like China. But the proliferation of these corporate transfers and investments makes clear it’s too sieve-like. And plugging holes is particularly important now because China has so aggressively challenged America’s position as the lead power in the economically vibrant East Asia-Pacific region.

I’ve long opposed the U.S. strategy of maintaining major military forces in this far-off area decades after the Cold War’s end in order to fend off the Chinese and North Koreans. But if American leaders stay determined to ignore my advice (!), it’s nonsensical to keep pushing for bigger and bigger military budgets and stronger forces (in part to buttress its East Asia strategy) while allowing American companies in effect to help China strengthen the military against which Americans may fight. So let’s hope Congress sends a CFIUS reform bill to President Trump’s desk tout de suite.

The second, more dispiriting news item came from Reuters, and dealt with those tariffs Mr. Trump last week imposed on certain imported washing machines from South Korea. As I wrote on January 24, these actions seemed to infect officials in South Carolina with a case of Trade Derangement Syndrome – the utter mindlessness produced by announcements or fears of even small-scale restrictions on trade flows. In this case, South Carolina officials were criticizing the tariff decision even though it undoubtedly led one South Korean manufacturer – Samsung – to announce that it would begin producing washing machines in the Palmetto State, thereby avoiding the tariffs and creating hundreds of jobs for South Carolinians.

Yesterday, Reuters reported similarly looney reactions on the part of the other South Korean company fingered – LG Electronics. LG, too, clearly has been convinced by the prospect of tariffs to manufacture some of its products in the United States – in this case, in Tennessee. But the company clearly is not thrilled with the prospect. It’s grousing that, because of the tariffs, it will need to raise the prices it charges American consumers.

That’s pretty par for the course – though has anyone who’s bought a major appliance lately seen many producers or retailers that are full of confidence that they can charge more? But what was completely doofy was what the company spokesperson quoted by Reuters reporter David Lawder (with a figurative straight face) said next. He fretted that the price increase could cost the company market share, therefore reducing the demand for the new Tennessee factory’s products and for local workers. And then he noted that the costs could be long-lasting: “If you lose floor space at retail, it can take years to get it back.”

I don’t blame the LG spokesperson for trying to drum up American opposition to the tariffs any way possible. But maybe Lawder could have asked him why on earth the company would take actions that it’s admitting would lose it money – for “years”? Or pointed out that these adverse consequences do a great job of explaining why LG is not remotely likely to raise prices? Instead, Lawder simply permitted the LG flack to get away with arrant nonsense – and reinforced my claim that nothing, but nothing, is as badly, and as tendentiously covered by the media as anything having to do with international trade.