Donald Trump has made a big point of not studying the issues as he campaigns for president. Don’t expect to see him with his nose in a briefing book. But Trump could learn something about how the world works if he did a little research, and then perhaps he might revise his cockeyed notions about Mexico and Mexican trade. After all, his views on just about anything are known to be, well, changeable.
I’m an auto guy, so let’s look at our auto trade with Mexico. Trump is there, too, targeting Ford for proposing a $2.5 billion plant on Mexican soil. “They’re taking in billions and billions of dollars, the Ford company,” Trump said. He’d tax Ford’s Mexican-made parts, and use the money to build that benighted wall he’s fixated on.
So here’s what’s really going on. Mexico is indeed “killing us at the border,” as Trump puts it, and the traffic in cars and car parts is mostly one way. In the first half of 2015, we exported $1.4 billion in vehicles to Mexico in the first half of 2015, but imported $11.3 billion. Right now, there are more than 3,000 so-called maquiladora plants, set up in free-trade zones, in the north of Mexico.
Automakers can take a left or a right, but if they head south, they're going to save boatloads of money. (Photo: Robert Silz/flickr)
But are the Mexican plants turning out Mexican cars, that we then buy? No! American, German and Japanese automakers set up down there because labor and manufacturing costs are far lower. Is that a good thing? Nope, it’s horrible for American workers, and it closes plants in places like Michael Moore’s beloved Flint, Michigan. But the big profits are being made not by Mexican firms, nor by the individual criminal, drug-dealing Mexicans Trump talks about, but by every global automaker. Detroit’s riding high on profits made in Mexico.
Here’s a breakdown of investment since 2013, courtesy of the Detroit Free Press:
General Motors: $5 billion investment, 5,600 jobs in four locations.
Ford: $2.5 billion, 3,800 jobs, two locations. Small gasoline engines and transmissions.
Toyota: $1 billion, 2,000 jobs, Guanajuato in central Mexico. Makes the Corolla.
Mazda: $800 million, 4,600 jobs, Salamanca.
Honda: $1.27 billion, 4,700 jobs, Celaya.
Volkswagen: $1 billion, 2,000 jobs, Puebla. Tiguan compact crossover.
Audi: $1.3 billion, 3,800 jobs, San Jose Chiapa. Q5 crossover.
BMW: $1 billion, 1,500 jobs, San Luis Potosi. Possibly the 3-Series.
Kia: $1 billion, 3,000 jobs, Nuevo Leon, near Monterey. Forte and Rio.
Daimler-Nissan joint venture: $1.4 billion, 5,700 jobs, Aguacalientes, Mercedes and Infiniti small cars.
Nissan: $2 billion, 3,000 jobs, Aguacalientes. Sentra.
Fiat Chrysler: $1.23 billion, 1,570 jobs. Ram ProMaster Tigershark engines.
There’s an astounding $19 billion in new investment in Mexican car plants, and production has doubled there since 2010, to 3.2 million last year (with two-thirds of those coming to the U.S.). The country is a free-trade leader, hammering out agreements with 45 countries (the U.S. has 20, and squads of politicians hot on eliminating the Export-Import Bank).
The bottom line is that the average Mexican autoworker makes $8 an hour (including benefits), compared to $58 for the average General Motors worker in the U.S. Even down South, where labor is cheapest, VW workers in Tennessee make $38 an hour.
But Donald — can I call you Don? — arbitrarily taxing cars and parts from Mexico won’t help the American economy. Unless there’s a law in place requiring American cars to be made in America — or a minimum wage of $8 an hour — jobs are going to go overseas, and if not to Mexico, then perhaps to Korea or Vietnam. That’s where Ford’s jobs would go if President Trump taxes Mexican-made auto parts.
A typical maquiladora plant on the Mexican/U.S. border. (Photo: Hilary Mason/flickr)
We can’t use walls or legislation to bring back American auto jobs, just as we haven’t been able to build plants to make computers, TVs or iPhones. It’s indeed bad news for U.S. workers, but not so bad if you subscribe to the dictum that what’s good for General Motors is good for America. And the big winners are not evil Mexicans, but the corporations (nearly every auto company) that are getting skilled labor at a bargain price.
By the way, are cars made in Mexico of lower quality, as many believe? In years of testing, I can say I haven’t found that to be the case. No less an authority than Renee Stephens, vice president of auto quality at J.D. Power, looked at U.S.- and Mexican-made cars and says, “There’s no big disparity in terms of reliability and quality. In general, if the car is engineered well from the get-go, it doesn’t matter where it’s produced. From what I’m seeing in the data, there’s nothing to worry about.”
These issues are agonizingly complex, and can't be reduced to simple Trump-type soundbites. Michigan, concerned about losing auto jobs and wanting to be more wage-competitive, became a right-to-work state in 2012. The unions (in one of their few remaining strongholds) are understandably infuriated, but that status is why some plants have located not in Mexico but in the right-to-work South. And meanwhile, parts of Detroit are going back to wilderness. Here's video: