Authored by Mike Shedlock via MishTalk.com,

The threat of total abandonment of NAFTA took on a second front this weekend as Canada’s biggest private-sector union said NAFTA should be scrapped if Mexico cannot agree to better labor standards.

Please consider Sharp Differences Over Labor Surface at NAFTA Talks in Mexico.

Tensions over sharp differences in pay between Mexican workers and their Canadian and U.S. counterparts surfaced on Sunday as negotiators discussed labor market rules in talks to overhaul the North American Free Trade Agreement. Canada’s biggest private-sector union said NAFTA should be scrapped if Mexico cannot agree to better labor standards, clashing with Mexican business leaders who argued that workers rights were a matter for each country to resolve internally. Mexican political and corporate leaders firmly resist demands to bring wages into line with U.S. and Canadian levels, arguing the big cost advantage the country enjoys over richer peers should decrease as economic development advances. Labor union leaders in the two wealthier nations say laxer labor standards and lower pay in Mexico have swelled corporate profits at the expense of Canadian and U.S. workers, making resolution of the issue a major battleground of the NAFTA talks. Jerry Dias, national president of Canadian union Unifor, said NAFTA had been a “lousy trade agreement for working-class people” and that the union was pushing his government to walk away from the talks if it could not secure them a better deal. “If labor standards aren’t a part of a trade deal, then there shouldn’t be a trade deal,” Dias told reporters in Mexico City on the sidelines of a second round of negotiations to update the 1994 trade agreement among the three countries. Bosco de la Vega, head of Mexican farm lobby, the National Agricultural Council, said more trade, not intervention in labor markets, was the best way for the region to grow economically. “Mexico can’t interfere in the labor market issue in the United States and Canada. We ask the same: that they don’t interfere in these matters,” he told reporters at the talks.

Moral Outrage Over Free Trade

Are bad jobs at bad wages better than no jobs at all? Should the US demand third world economies pay “living wages”?

If so, and if countries don’t oblige, should the US impose tariffs so the US does not lose jobs to such countries?

This is what I think…

Moral outrage is common among the opponents of globalization–of the transfer of technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive Third World exports. These critics take it as a given that anyone with a good word for this process is naive or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and abroad.

But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.

Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say “inevitably” because their employers are not in business for their (or their workers’) health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives.

And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. More importantly, however, the growth of manufacturing–and of the penumbra of other jobs that the new export sector creates–has a ripple effect throughout the economy. The pressure on the land becomes less intense, so rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories start to compete with each other for workers, and urban wages also begin to rise. Where the process has gone on long enough–say, in South Korea or Taiwan–average wages start to approach what an American teen-ager can earn at McDonald’s. And eventually people are no longer eager to live on garbage dumps.

The benefits of export-led economic growth to the mass of people in the newly industrializing economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still malnourished–but in 1975, the fraction was more than half. Similar improvements can be seen throughout the Pacific Rim, and even in places like Bangladesh.

Why, then, the outrage of my correspondents? Why does the image of an Indonesian sewing sneakers for 60 cents an hour evoke so much more feeling than the image of another Indonesian earning the equivalent of 30 cents an hour trying to feed his family on a tiny plot of land–or of a Filipino scavenging on a garbage heap?

The main answer, I think, is a sort of fastidiousness. Unlike the starving subsistence farmer, the women and children in the sneaker factory are working at slave wages for our benefit–and this makes us feel unclean. And so there are self-righteous demands for international labor standards: We should not, the opponents of globalization insist, be willing to buy those sneakers and shirts unless the people who make them receive decent wages and work under decent conditions.

This sounds only fair–but is it? Let’s think through the consequences.

First of all, even if we could assure the workers in Third World export industries of higher wages and better working conditions, this would do nothing for the peasants, day laborers, scavengers, and so on who make up the bulk of these countries’ populations. At best, forcing developing countries to adhere to our labor standards would create a privileged labor aristocracy, leaving the poor majority no better off.

And it might not even do that. The advantages of established First World industries are still formidable. The only reason developing countries have been able to compete with those industries is their ability to offer employers cheap labor. Deny them that ability, and you might well deny them the prospect of continuing industrial growth, even reverse the growth that has been achieved. And since export-oriented growth, for all its injustice, has been a huge boon for the workers in those nations, anything that curtails that growth is very much against their interests. A policy of good jobs in principle, but no jobs in practice, might assuage our consciences, but it is no favor to its alleged beneficiaries.

You may say that the wretched of the earth should not be forced to serve as hewers of wood, drawers of water, and sewers of sneakers for the affluent. But what is the alternative? Should they be helped with foreign aid?

And as long as you have no realistic alternative to industrialization based on low wages, to oppose it means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard–that is, the fact that you don’t like the idea of workers being paid a pittance to supply rich Westerners with fashion items.

In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.

Purposeful Plagiarism

I need to point out that everything above following “This is what I think…” was not written by me (but it does reflect my exact beliefs).

Believe it or not, Paul Krugman wrote that, and here is the link: In Praise of Cheap Labor.

Krugman wrote that before he lost his mind.

Fair Trade is Unfair

The unions howl they want “fair trade”. Fair to whom? The answer is fair to their self-interests, damn the enormous costs to everyone else.

Tariffs will not bring jobs back to the US, at least jobs by living, breathing human beings.

All tariffs will do is slow global trade and raise costs on everyone.

Those looking for someone to blame for income inequality and low real wages, should not look at globalization, but rather the Fed (central banks in general), insisting on rising prices in a technological deflationary world.

Repetitive asset bubbles and the demise of the middle class are the direct results.

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An ideal trade agreement can fit on a napkin: Effective immediately, all tariffs and all subsidies, on all goods and services ends today.