Protectionism Hurts GM's Business

So then Mexico will respond. Jobs will be lost in Brazil. So forth and so on. Everyone is worse off except the most politically adept or fortunate. Malaise and fatalism grow for some marginal improvement in some marginal places. Wouldn't it be better if people concentrated on working harder and smarter and achieving from that rather than fighting over the crumbs in a zero sum game of their own making? It's odd because you can likely graph the happiness of populations and correlate it exactly with their perception that the world about them works precisely in the opposite manner.

@Landcrusher That is if Brazil was then exporting cars to Mexico. Mexico probably is very export heavy on cars and not importing much. Really, Mexico's best option would be to have more cars exported to other countries. But that is harder to arrange. But, if Mexico because this great car exporter, it becomes more expensive to build cars in Mexico from high labor costs that would be coming and countries would pull out of the agreements. In face, I don't think it is a zero sum game either. When new plants open, there is always MORE automation, fewer jobs. But, this happens everywhere. In the US, when automanufactures want to open a new facility, they will get tax breaks from different states and pick the best deal. Currently, this is how it all works.

@Landcrusher "So then Mexico will respond." No, they won't. Mexico exports far more cars than Brazil does. The reality of the situation is that at least for now, Mexico gets more out of an FTA than Brazil does. Mexico's proximity to the US surely has a lot to do with this. There is no reason to believe that Brazil is poised to become a significant player in global auto exports. http://www.economist.com/node/21549950

@Landcrusher Where does it say anywhere that Mexico can only respond by not importing Brazilian cars? In fact, there is no reason the reaction has to come directly from Mexico. Just because some idiots right a law in a book thinking they will achieve something doesn't mean they will get their results without consequences. They never do, but they keep trying. Bunches of Brazilians will lose their jobs because of this, it just won't be acceptably obvious to the pols. Whatever that trade with Mexico was creating demand for will cease, and that trade will cease, and so on and so on. No free lunch. At worst, if it appears to work, then more countries will do it back to Brazil beacuse it works, right? Sorry Embraer, or whoever. It's all a waste of time, don't start it. If creating wealth could really be achieved by protectionism we would have all stopped reproducing after we stopped talking, after we stopped trading with everyone outside our caves. It's so asinine. I can't wait for the scientists to figure out what quirk makes people fall for this drivel.

@Landcrusher "Where does it say anywhere that Mexico can only respond by not importing Brazilian cars?" It was my hope that providing factual information would inspire you to do some research instead of engaging in yet another politically charged, factually deficient rant. I guess that my hopes were misplaced. The reality is that Brazil runs a trade deficit with Mexico. For the first three quarters of 2012, Brazil bought $3 of imports from Mexico for every $2 that is sold. That gap has widened in percentage and absolute terms in comparison to the prior year. Additional car imports would increase that gap. Those imports also represent an opportunity to create value-added employment in Brazil's home market. If you have a better, tangible idea for the Brazilians that has some data and factual support behind it, then provide it. What they're doing isn't really any different from what every major auto producing nation in the world has done at one time or another, including Mr. Schmitt's beloved China and Japan.

@Landcrusher So then Mexico will respond. Jobs will be lost in Brazil. So forth and so on. Everyone is worse off except the most politically adept or fortunate. "At worst, if it appears to work, then more countries will do it back to Brazil beacuse it works, right? Sorry Embraer, or whoever. It’s all a waste of time, don’t start it." You are correct. Embraer is a good example with their regional jets. Bombardier(canadian company) claims that brazil subsidizes embraer so gets gov't support to compete. Embraer lobbies their gov't their gov't for more subsidies to compete against the dastardly canadian taxpayer supported bombardier and on it went. Billions in subsidies, grants, R&D tax breaks and the economic output is the same in the end only tax dollars are spent on subsidizes and not on public services. Perversely both gov'ts help to subsidize the jet purchases by foreign companies.

@Landcrusher Sorry PCH, trading facts won't change the truth. Protectionism is bad. As the article shows, the trouble they have is competitiveness, likely caused by... Wait for it... Years of protectionism. Yet we have these conversations about how it just might be good? No. It's bad. It's not political at all, it's bad. Everyone with a degrees in economics that disagrees should lose the right to call themselves an economist. I doubt even Krugman would say its good publicly.

@Landcrusher "trading facts won’t change the truth." "Trading facts" would imply that facts are moving in both directions. Unfortunately, I'm the only providing the facts in this exchange. When it comes to this fact trading business, I'm running a substantial trade deficit, because I'm receiving far fewer facts than I'm providing. The reality is that Mexico and Brazil have very little trade with each other, and that isn't likely to change. There isn't much "comparative advantage" in their relationship because they both export similar types of products, hence they both tend to do business with other countries much more so than each other. Meanwhile, both countries play host to foreign auto producers. Brazil now has a noted disadvantage with exchange rates, since the real has appreciated against the peso. The last thing that a country such as Brazil needs is to have those foreign firms bail out of their country because of the exchange rate, but the risk of that increases given Mexico's proximity to the US and its membership in NAFTA.

@BigMeats....Your comment is certainly one of the more intersting I've read so far. I was a Canadian autoworker 36+ years. When our award winning truck plant was shipped to Mexico,I was bitter,and believed that protectism might be the answer. Four years later I'm thinking,I could have been wrong? I was one of the lucky ones, with a nice buyout package. Much of your comment is painfully true. We had it good, and didn't know it. Then I read what Marcello thinks, and he is from Brazil. Protectism seems to be working for them. I just don't know.

+1000: Post of the month.