Articles, Blog

NAFTA, explained with a toy car

NAFTA, explained with a toy car

This is a 1993 Chevy Suburban. And this is a 2018 Chevy Suburban. The 1993 one cost $21,000 brand new and 2018
one costs $47,000. But if we adjust the price for inflation,
the 1993 Suburban would cost $42,000 today. Even though the 2018 model comes with modern
features like a back up camera, remote engine start, and ya know – airbags – the cost hasn’t
changed much in 25 years. It’s not just the Suburban — the average
price of new cars has risen only 7% since the early ’90s. While the price for almost all other goods
has increased by 86%. And that, is thanks to NAFTA. “The nations of North America are ready.” “Strengthened by the explosion of growth
and trade” “To recognize that there is no turning back
from the world of today and tomorrow.” When the North American Free Trade Agreement
took effect in 1994, it was the first major trade deal of its kind. The US, Canada and Mexico agreed to eliminate
tariffs, which are taxes on most imported and exported goods. The countries hoped it would increase investments
and that by strengthening Mexico’s economy, it would slow illegal immigration. The trade agreement benefited the
auto industry in particular. It allowed automakers to keep costs down, because cars and auto parts could be traded for free. Well, for the most part. If at least 62.5% of a car’s parts were
sourced from North America, it would be tariff-free. Cars that didn’t meet the requirement, or
were made overseas, would be slapped with a 2.5% tariff. NAFTA also gave automakers the ability to
source cars where costs were lowest. By comparison, a car made in Mexico costs
$1,200 less than one built in the US because labor and the parts are cheaper. “As an industry, we’ve kind of performed some economic
miracles when it comes to keeping cars affordable by being able to source some of those 30,000 parts
from, you know, the least expensive places.” Let’s take this model of a 2014 Ford Mustang
for example. It’s engine was built in the U.S., but it’s
manual transmission came from Mexico. It’s impossible for a consumer to easily
find out where each individual part came from, but it’s likely the doors were molded
in Canada. The speedometer came from Germany or China, which was assembled in the US, but then sent to Canada to be installed into the dashboard. The seatbelts did come from a company in Japan. But the seats were probably made in Mexico. The tires most likely came from South
Korea. In the end, the 2014 Mustang was built in
Detroit, but with only 65% of its total parts sourced from North America. It made the tariff cut. And Ford is in no way the only company who
does this. About three-quarters of the cars sold in the
US meet the standards to avoid tariffs, including most cars produced by the top four auto brands. The US is actually producing more cars now
than before NAFTA. Same for Mexico and Canada. But you wouldn’t know that if you listened
to politicians. “NAFTA was a mistake.” “The single worst trade deal ever made,
by any country, anywhere in the world.” “Instead of creating jobs, NAFTA cost us
jobs.” In the auto industry alone, a third of US
auto manufacturing jobs have disappeared since NAFTA was signed. As the same types of jobs have grown in Mexico. But in reality, that may have less to do with
NAFTA, and more to do with automation. Researchers have found that fewer than 5%
of US jobs lost from sizable layoffs can be blamed on trade with Mexico. But the timing of these manufacturing layoffs,
in lots of different industries, made it easy to point the finger at NAFTA. So while most Americans think the trade deal
was good for the US, those that feel they were directly affected are passionately against
it. And this opposition is why President Trump
is following through on a campaign promise. “A brand new deal to terminate and replace
NAFTA called USMCA. It sort of, just works. MCA.” But this isn’t a much of a new deal. While it’s essentially a re-branding of
NAFTA, it does make one major change to the auto industry. Because it would require cars be made with
75% North American sourced parts. And that 40-45% of those parts must be made
by workers who earn at least $16 an hour. At least 46 and as many as 125 cars sold today, that aren’t taxed under NAFTA, wouldn’t qualify under the proposed USMCA regulations. Our 2014 Mustang likely wouldn’t meet the
new requirements. So if it is implemented, auto manufacturers
will have to decide to just pay the 2.5% tariff or change how they manufacture their cars
sold in North America, even if it increases production costs. “What looks small on paper, when you think about the complexity and how many parts are on every car, it starts
getting out of hand fast.” Prices of those cars could go up anywhere
from $470 to $2,200 dollars in the US. And at these higher prices, roughly 60,000
to 150,000 fewers cars would be sold in the US each year. That would mean job losses. “I don’t want to see our companies leave
and fire our workers. Those days are over.” But the USMCA could actually incentivize car
companies to leave North America. NAFTA made US car companies more competitive
with the global market, and even attracted foreign car companies to build in North America. And if those cars are going to face higher
costs of manufacturing and tariffs – their production might get moved to China or other
countries. Building a car with thousands of parts is
an incredibly complicated process. So while NAFTA has kept cars pretty cheap
to produce, the USMCA could change that. And consumers will likely be the ones to pay
the price.

Tagged , , , , , , , , , , , , , , , , , , , , , , ,

100 thoughts on “NAFTA, explained with a toy car

  1. Renegotiating NAFTA is the latest in the Trump administration's escalating rhetoric and action around international trade.
    Watch our video on trade wars, which outlines what's at stake:

  2. This deal was always overrated, it ruined the manufacturing industry, especially in cities of the midwest. It ruined the labor movement, which do you think anyone in Mexico cares about? They are right to redraw the horrible idea that this was. Detroit automakers would've never needed a bailout if NAFTA didn't come to be. Saving a few thousands dollars on cars, was not worth it.

  3. Im good with my Highly Tuned 2011 Mitsubishi Eclipse GT, Highly Tuned 2008 Nissan 350Z,and highly Tuned 1999 Mitsubishi 3000GT VR-4

  4. What about when we (Americans) sell our goods to Canada they tax it and we cannot tax their goods shipped to the USA how is that fair? Can u explain that left leaning vox? For example our dairy products. Explain that one to me how was nafta fair for Americans?

  5. Compromising labour regulation, environmental protection, and product safety are all done in the name of competitiveness. Just because It is part of Trump’s platform doesn’t mean is it completely bad. Judge the policy by its merit and not by who implemented. This is the most bias and poorly done video by Vox by far. I used to enjoy your channel but this kind of blunt bias production is truly disappointing. If we go by Vox’s competitive reasoning, northern American governments should remove minimum wage, end environmental protection and labour regulation to increase competitiveness.

  6. Although labor is one factor that plays into the price of a vehicle, it's not the real reason why the price of cars has basically stagnated over the years. There are way too many variables, including demand, the price of technology, and the quality of the product.

    Also, the price of cars has basically stagnated throughout history, even long before NAFTA.

  7. Nafta makes jobs go to other countries taking away jobs one day robots might do all the work but for now we need money and that requires jobs . The cheaper a car is doesn't mean anything when you don't have money to pay for it. Thats why people leave 3rd world countries.

  8. This explains why GM is moving their plants form Canada to Mexico like 10 years after we bailed them out. Never buying GM again

  9. Isn’t it better if cars cost more? It feels like a good opportunity to revamp public transport and get people off the road. Less traffic, less pollution… We’d lose jobs in manufacturing, but factory jobs aren’t exactly a dream. They’re historically hard labor jobs in unsafe conditions. Let’s move away from those kinds of jobs and create more ethical/sustainable jobs. Other developed countries are doing it, why not the U. S.?

  10. I think we should be very concerned about the ppp adjusted price of everything other than cars rising 86% in 20 years. That’s a lot…

  11. I'm a fairly loyal Vox fan but I felt a little uncomfortable with some of the numbers in this video.

  12. I remember when the Democrats we're the party forward the working man. Now they are telling us how NAFTA is good. Wow!!!

  13. This doesn’t explain how the economy in the US will benefit long term. Manufacturers who manufacture products in the US will need labor force from the US, more people in the labor force the stronger the economy because these people will now have money to spend rather than collect unemployment from the government. Yes price of goods may go up, but with a stronger economy these products will be available for those who are in the labor force and can afford them, things will eventually balance out. And as far as automation, humans will still be needed to manufacture
    /service/work on those machines.

  14. Wow…Vox suggesting that capitalism is a good thing? Oh, that’s right, anti-NAFTA is now a GOP viewpoint, thus Vox is suddenly a fan of free markets!

  15. But wouldn't this "new" agreement have to be agreed upon by Canada and Mexico as well? So there's a chance that nothing will change if Canadians and Mexicans are for keeping NAFTA. As a Canadian, I'm personally for keeping NAFTA because it affects more than just cars. In particular, I don't think anybody would want grocery prices rising because of higher import tariffs on certain fruits and vegetables

  16. jokes on america for building the country around cars. all this wouldn't be a problem if we just lived closer and had public transportation now would it. stupid suburbs…

  17. TARIFFS cost the Consumer little..
    They are charged on the First cost after Manufacturing.. and not at the Retail PRICE…

  18. Jobs lost locally means no one can buy that CAR!!
    We need North American factories to reduce costs…
    ONE WAY??

  19. I work on vehicles…more than 50% of parts are Foreign made in " North American " ….vehicles from USA….AMERICA…
    Assembled in NORTH AMERICA
    IS NOT
    " MADE IN USA "

  20. yes please make more giant 1, 000 ton, gas burning, man killing, cityscape destroying chunks of steel & pollution .
    we need to make thousands more & throw away the ones from last year. because economy

  21. 3:18 "US is producing more cars now than before NAFTA, same for Mexico and Canada"
    The graph you showed says the levels basically stayed the same though…

  22. This is complete garbage! This was obviously made by the corporations. Nafta undermined unions, destroyed millions of good paying jobs, while at the same time exploited low wage Mexican workers.

  23. This is mostly bullshit, you won't find a progressive scholar anywhere that thinks NAFTA wasn't a massive force of destruction for the working class of both the United States, and Mexico. NAFTA laid the foundation for the corporate totalitarianism we now face.
    Trump's words we're correct, but the legislation he passed was equally pro corporate, with maybe a few tiny improvements.
    This video looks like it was fact checked by the auto industry.

  24. There is a lot more to nafta than the auto industry. It did not do what we hoped it would do. I know for a fact that Lexmark printers from making toner ink from Boulder Colorado to a new plant in Mexico because of less restrictions and cheaper labor. Linds bowling moved shoe manufacturing to Mexico and the quality went to junk. It just was not well thought out.

  25. But it is simultaneously killing a lot of jobs in the US. I feel like that is why Trump is popular in the Mid west.

  26. We’re going in the opposite direction as a country when we try to get back jobs for people for things that can and should be automated

    The solution is not to remove automation. Its to move to more skill-based jobs and better education so that future generations have more skills that can be applicable in a new world where humans don’t have to do the labor that robots can do for them

  27. So is this why quality and longevity has gown way down???

    Is this why standards have become weak?
    Weaken products and consumer standards? To save the weak American currency? How about we re-strengthen our TANGIBLE CURRENCY.

  28. Automation…just the excuse for Non doers.

    Enjoy your health your osteoporosis automation supporters.
    20 somthing geriatric crisis.
    Have fun with that.

  29. God forbid we have to pay 500 extra dollars on a car, I think if you ask most Americans to pay a little extra to keep our own countrymen employed I think most of you would be pleasantly surprised. Patriotism is more than just a scary concept you people seem to think we only espouse to keep the brown people down, it can be a source of great strength especially in the face of the prospect of economic hardship.

  30. It was important for me for the exam prospective and this video explained in an amazing way thanks for that

  31. NAFTA caused millions of economic refugees from Mexico. Mexican farmers couldn’t keep up with the American corn market so they lost they left their place of origin to find jobs. Down with nafta

  32. Rather than bringing back low wage manufacturing jobs…. America needs to invest in re-educating people who would lose those jobs to benefit from moderate to higher wage jobs that would come from adopting renewable technology and electric/hybrid cars… Problem is, politicians don't care in investing in something like this… They care about short term gains that get them elected and let the future generations deal with the problems that the pursuit of those short term gains created.

  33. Is cheap cars thanks to nafta or is it thanks to Toyota essentially taking over the United States with their cheaper cars which also have less problems?

  34. Las empresas manufactureras de carros, contaminan los ríos mexicanos, y esto produce una serie de enfermedades como cancer alrededor estos ríos, las salarios son precarios y Mexico no genera valor agregado.

  35. The USMCA is a step in the right direction, as automotive production becomes more automated, the US stands to lose more jobs if something isn't done.

  36. With the additional cost resulting from the new strict guidelines, its more financially sound for an automaker to move production to the cheapest location and pay the tarrif at the end.

  37. Free trade is always a good idea. Tarrifs always hurt the consumer and can lead to higher taxes for bailouts.. Free trade is supposed to be a conservative idea

  38. This Fails to Address the MULTIPIER EFFECT OF THE DOLLAR a dollar stays in the neighborhood and turns over an average of 7X, so a once vibrant Detroit is now a failed City..

  39. okay but this kind of feels like a good thing. Increasing car prices would mean less people having them which is probably good. And this means more jobs in north America. They showed that Obama was against NAFTA. But because trump is against it suddenly NAFTA= good. I really dont like Trump, but that doesn't mean everything he supports is awful. This new agreement seems like a good thing.

  40. I appreciate the clarification on the benefits of NAFTA for North American car manufacturing. What I would like is a breakdown of the economic, environmental and social costs/benefits of free trade for other industries – agriculture, apparel manufacturing, tech, etc. If Vox could do a series of explainers compiling research on the effects of free trade in distinct industries, for distinct groups of people (Mexican farmers, Jamaican clothes factory workers, U.S. middle class consumers, etc.), that would be great.

  41. The one problem with NAFTA was that it killed a lot of manufacturing jobs in the US. Some industries like the car industry weren't affected as much due to the complexity and resources needed to create such an item. Other industries weren't as fortunate. In my home town we lost the Mead plant ( which made folders and trapper keepers for kids Lost to Mexico), Stetson hat plant ( one of only two plants that was in the US. Now there is only one plant in Mexico.), jean plant (forgot the brand. Lost to Mexico), and about three other production plants to Mexico.

    When people complain about NAFTA; this is what they meant; losing tons of production jobs to Mexico while small blue collar towns are left with nothing. I know that eventually mechanization would of put some of the people out of work; yet others would of been trained on how to operate said machinery and be able to keep their jobs.

    Yet the US lost tons of blue collar jobs right after NAFTA and started the mass killing of the middle class.

  42. Andrew Yang is one of the few presidential hopefuls is addressing the issue with automation without hurting innovation

  43. It's a similar thing with lego. For example, on the underside of my little red lego car thing….. whaterver it says: 'components made in denmark, hungary, mexico, china and the czech republic'

  44. Car sales in the US are down since Trump took office. Americans can't affords new cars anymore thank to Trump.

Leave a Reply

Your email address will not be published. Required fields are marked *