Thursday, March 2, 2017

I'm South Of The Border, Down Mexico Way.

  As you read this I'm in Mexico City, soaking in the history and culture--and trying to get a sense of how the drama of our relationship with this country will affect us in South Dakota.  My
It's A Big Market
And We Need The Business
(from Colombia Post)
take on departure is that the rockiness of our association can only hurt where we'll feel it the most--in the pocketbook.  Mexico, since the inception of NAFTA, has turned into an immense market for South Dakota during the past couple of decades, particularly when it comes to our agricultural production. I watched much of this happen during my years in local cattle production and marketing back in the '80s and '90s, but even as things were heating up on the free trade front back then, it hardly seemed realistic that we'd get to where we are now with our sales to Mexico.  In 1995 total SD exports to Mexico amounted to a virtually negligible $6 million.  Mexico 
was then our 10th largest market. In 2015 that number swelled to $400 million as Mexico became our 2nd largest foreign market. 
      This broadly tracks the overall growth of American sales to Mexico, which jumped from $46 billion to $230 billion during the same period.  But that's where South Dakota's experience parts company with the United States as a whole.  Where our national macro-experience has resulted in the much-derided but insufficiently understood  (It's too simplistic to call them "bad" despite what politicians say.) trade deficit of $63 billion, South Dakota's experience with Mexican trade has resulted in a huge surplus.  The U.S. Census Bureau calculates that South Dakota imports (in 2015) just $70 million of goods from Mexico, which gives us a state-surplus of well over $300 million. This sounds nice but isn't particularly reflective of anything other than the fact that we sell more to
Closing Doors?
Bad Way To Relate
Mexicans than we buy from them.  What we need to focus on is the amount of our sales, not the net dollar differential in our trade.  

     And that's where the more insidious problem resides.  If Mexico responds to our protective trade impulses with retaliatory trade measures of their own, we're off and running to a trade war, which could easily result in a serious slowdown of South Dakota's agricultural sales to Mexico.  In the meantime, tariffed, goods that we buy from Mexico will get more expensive.  Of such dynamics are international financial crises bred.  That anybody thinks a scenario like that will get American workers back to the production lines because we'll all be "buying American" again is a poor reflection on our collective grasp of history.  

3 comments:

  1. My elder daughter and I are wont to use the term 'nose cutter' as an appellation for those folks, all to common unfortunately, who routinely engage in counter productive actions. Albeit the approach is bi-partisan to be sure, currently the most vigorous practitioners are Republicans in a position to wreak irreparable damage to our economy. Yeahp, elections have consequences.

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  2. Mr T, were you able to snag a handfull of South Dakota pols to take with you so they could learn a thing or two about trade and economics and the benefits of being good neighbors?

    Rudimentary stuff, to be sure, but it seems a refresher course would come in handy.

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    Replies
    1. No, mfi, but it's a pretty decent thought.

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