Pull out of TPP and watch the jobs go overseas: First up Harley Davidson

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6. I am not an expert on NAFTA

But I am an expert on the affects of NAFTA on the furniture industry. At the time I was CEO of furniture company that made both component parts and finished furniture.

In the US market our product (cut and sewn leather kits) were designed to enable American manufacturers compete with Italian manufacturers.

While we were able to help companies like Stratalounger have a cost effective advantage against imports but there were production problems. The main problem was that the incentives for the US workers was so tied to time that if there was any problem they just threw away the kit (worth $ 500 each) and go to the next one.

When I visited the factory after the first run of production and saw a huge pile of discarded kits I knew that the culture in the factory wasn't going to work. I went to Mexico to try and find a partner or consider opening up our own assembling plant there. We were not able to find a partner in Mexico and the general level of manufacturing was so low that we would have sent at least 15 Thai workers to guide the process.

While I was there I toured many factories, almost all Japanese car and electronics manufacturers who were successful there, but again they brought in dozens of Japanese workers to be line supervisors. To compare IBM Thailand at the time employed zero Americans but did have dozens of Thais who had graduated from Ivy league Universities.

The commonly held discussion that NAFTA resulted in a one way reduction of US Tariffs on Mexican goods is simply not true.

In fact the opposite is true in every example I have seen.

The US had already reduced tariffs on Mexican goods in a lot of cases BEFORE NAFTA. For example I visited dozens of very large manufacturing plants in Mexico that were established 10 years before NAFTA along the Mexican border, under the Maquiladora Program.

https://en.wikipedia.org/wiki/Maquiladora

After NAFTA tariffs of American goods into Mexico were dramatically reduced to match the low tariffs that the US already had and that led to a huge increase of US exports both ways.

The impact on the Maquiladora Program shows the complexity of trade. If you look at the importation of cars into the US from Mexico there was a huge increase, but not because tariffs changed for exports from Mexico but because with the lower tariffs into Mexico Japanese manufacturers could pay less for parts they bought in the US.

In any case one of the key issues that is not discussed is how trade effects fungible jobs (fungible meaning easily moved). The US is exporting products with higher capital, higher skill, higher tech and are less fungible, meaning that you can't just move a complex manufacturing job like high tech lasers but it is pretty easy to move garment manufacturing because sewing machines can me used any where.

The result is that the benefits to the US side of NAFTA are more permanent while the benefits to the Mexican side are less permanent. For example the WIKI on the Maquiladora Program points out that since China has become a more effective producer of low tech, low capital, low skill manufacturing more than 500 factories along the border in Mexico have closed and relocated to China.

In the furniture world we can see the high capital, high tech manufacturing remains in the US and the labor intensive has not really gone to Mexico, so for furniture the US under NAFTA was a big winner. An example of the former is a manufacturing facility that turns wood into very thin veneer and is compressed with particle board which is significantly cheaper than using a slab of wood for a table, an example of the latter, say upholstery has generally moved from the Midwest, to North Carolina and is now located mostly in Mississippi, there just isn't enough saving to move a plant from Mississippi to Mexico given all of the other problems you will get in Mexico.

It may be that there are some areas where NAFTA worked the other way but in general, as far as the areas that I have looked at, the advantages that Mexico would have gotten they in fact had already achieved years before NAFTA existed.