Food Prices Drop in Mexico as Trump Threatens to Cancel NAFTA

UPDATED 12-20-2017

For the first time in eight decades, retail gas stations in Mexico are getting competition from foreign firms — and a lot of it. It makes for a great illustration of the benefits of capitalism and, with NAFTA re-negotiations languishing, for an especially timely lesson in how connected our economy is to that of our southern neighbors.

Irving-based Exxon Mobil turned heads this month by announcing plans to spend $300 million over the next decade opening gas stations in Mexico, the fifth-largest retail gasoline market in the world. Eight opened already, and 50 should be open by the spring.  California-based Chevron and a consortium of partners have announced plans to open stores in Mexico, too.


THE SUNDAY POST 01/29/2017

IS TRUMP A SLY ACHIEVER? Trump’s Threat to Cancel NAFTA has Caused a Reduction in Food Prices in Mexico.

During an interview of both Canadian and Mexican citizens in preparation for this article this Canadian sentiment was voiced.  It may also be the sentiment of other non US Citizens. “Why should we pay the United States to use a pipeline that we own? The Americans are greedy, they want nice new cars, nice new homes at the expense of Canadian citizens.”

NAFTA  vs Oil and the Border

There are two oil pipelines that have been a mired in political rhetoric, accusations of big business interference in National Policies , Indian claims that their land is being ravaged and exposed to profound future pollution as well as  a proposed border wall.  All are influenced by NAFTA.  NAFTA is the one single thing that has enabled all of the above controversies.

The Mainstream Press continues to report inaccurate biased illogical information based on either deception or ignorance  on these issues and  how the Trump Presidency and subsequent Executive Orders affect the US.

The status  of the NAFTA and Oil pipe lines appears to have been easily dealt with by our new President. And both issues appear simple. We will build a wall that Mexico will pay for and we will complete the oil pipe lines. Without knowing all of the facts these decisions seemed to have been made off the cuff during Trumps campaign and followed with actual Presidential Executive orders.

With a little knowledge and in consideration of Trumps history of business success  it’s really not difficult to see through the tsunami  of drama created by the mainstream media.  Many who voted for Trump did so out of desperation, and so the “Jury is out” as to whether his actions are economically reasonable, and logically  in the interest of the United States of America. Its possible that the Politician’s in Washington and the Press wouldn’t know whether or not Trumps actions are  based on solid good business practices or not. But Trump was elected on the assumption that he  knows.

Based on interviews with the Mexican people , knowledge of the Mexican economy, interviews with many Canadian citizens a layman’s reasonable analogy of Trumps decisions can be made.  It’s a simple analogy  that no-one is really talking about much and is outside of the National Media agenda.

First the border wall.  It’s true that NAFTA is an unfair agreement. Why would any business let alone a country like the United States initiate agreements with the likes of Canada, Mexico, China or any other country that allows competitive countries to charge fees and taxes on anything and everything imported into their respective countries and  then allow these same countries to ship anything and everything into the United States fees and tax free?  Did you know that Chinese goods can be shipped from San Diego to New York for the price of a US Postage stamp.?   The Canadian inaccurate press rhetoric is understandable coming from a country that has enjoyed generational tax and tariff free exports to the United States.  Canada’s nationally sponsored news media reports that the elimination of NAFTA would have adverse affects on Mexico. This demonstrates the  poor understanding of the Mexican situation  not only by Canadians but by Americans..

How can manufacturing in the United States compete under conditions created by NAFTA? The answer is they cannot.  Who benefits from this kind of agreement?  The answer is Big businesses benefits .Their goal is to manufacture goods destined for sale in the United States using cheap foreign labor and materials free of tariffs and taxes in the United States.  Big business and the US Press argue that this causes lower prices in the United States. The truth is that no retail prices in the United States were reduced as a result of NAFTA in fact prices have increased.  It’s obvious that the difference between cheap labor and US labor has gone into the pockets of the fat cats in the United States.  It’s a fact that if you shipped a 10 pound parcel containing a new item manufactured in the US to Mexico, there is a minimum Mexican tax of 16% charged on the item. It’s also a fact that if you shipped a railroad car loaded with clothing made in Mexico, or China or Canada (including oil)  to the United States there is NO TAX or TARIFF imposed by the United States.  The boomers can remember paying 10 cents per gallon for gasoline. That was before NAFTA was created by the George Bush Sr. administration.. By the way, the Bush family just happened to be in the oil business.  Ask yourself, has the price of gasoline ever had a sustained reduction in price?

What’s all this have to do with the border wall?  Over the last 25 years the United States has poured over a billion dollars into Mexico to assist in the fight against drugs.

This is where the interviews with local Mexican residents and police officers comes in.  It’s also a fact that very little of this billion dollars actually made its way to the Mexican fight against drugs. Anyone who lives in the United Sates knows that the war to stop Mexican drugs from entering the United States is being lost…  So yes, with the stroke of President Trumps pen, Pena and his cronies will pay for the wall or that billion dollars they are receiving from the US may be diverted to the construction of a brand new border wall. A wall  that we can see and feel. A wall  that may help curb the flow of drugs into the country.  Trump has said that Mexico also will need to pay a tariff on their goods shipped into the United States.

The US news  media has painted a picture of Trumps actions that couldn’t be more inaccurate. The Mexican people are getting panicky about the price of goods in Mexico.  What will happen if Trumps plan to negate NAFTA comes to pass.  They fear the worst.  The US news media is directly responsible for this fear.

It’s also a fact that just this past week when Trump announced his plans to negate the NAFTA agreement, the price of food in Mexico began to fall. Why?  Because its good business that’s why. What are the growers and manufacturers going to do if they no longer have The NAFTA guaranteed  price advantage in the United States. What are they going to do if the US consumers now can purchase the same goods made in the USA for less or the same amount of  money than the goods manufactured in Mexico and China?  In anticipation of this, the Mexican distributors  have already begun to dump goods, especially perishable goods like vegetables into the Mexican economy.  They would rather sell the items for less to the Mexican consumer than get stuck with spoiled vegetables, or warehouses loaded with clothing.   Trump knows this.  So the ultimate truth of the matter is, the Mexican people have already begun to benefit not suffer from the Trump presidency.  Presumably China will be next.

About the Canadian pipelines.  This is a particularly sly move by Trump in the best interest of the US. It’s questionable whether or not Trump would have been in favor of the pipelines at their inception but the facts are (as mentioned above) that the deals with Canada and Mexico were made by previous administrations and now he must clean up the mess.  The NAFTA question must also be asked in reference to the Canadian Pipe lines.

Why would any Country allow not one but two or more new pipe lines to literally dissect the country from North to South and allow a foreign corporation to own the pipe and its contents at no cost other than the cost of construction.  We know what the answer is.  Big business taking care of themselves. The fact is that its not certain that  Canadian crude  refined by US refineries will be sold in the United States.  Its possible that the refined oil could be sent to United States adversaries.

Trump has made it clear that the pipe lines should be completed but the game of cards is going to be changed  to one that favors the “house”. (The United States.)  The pipe lines are a nasty problem not just because the contents pose a threat to the environment, but because they infringe on Native American lands. That being said, it’s very probable that Trump will change the location of the pipe to appease our beloved Indians. It is also known that Trump has made it clear that American Jobs and materials will be used to complete the construction. What is not known is what other changes in the agreements Trump will demand.  A Codefore mole has indicated that with the elimination of NAFTA, there will be Tariffs and Taxes to be paid on each and every barrel of crude that passes through the oil pipe lines and that the Indians will benefit from some of this. The Dakota pipe line is owned by Dakota Access, LLC, a fully owned subsidiary of Bakken Holdings Company, LLC which is a joint venture of Energy Transfer Partners LP (60%) and Sunoco Logistic Partners LP (40%), owns 75% of the pipeline, while Phillips 66 owns a 25% stake.  Transfer of ownership has already begun, and it looks like Sun Oil will be one of the main operations managers.  It would not be a surprise to see individual states end up owning their portion of pipe line and  that this  line will be subject to state regulations as well as Federal regulatilons.  Similar to a state owned “Transit Authority”

Both Canada and Mexico have similar problems.  In Canada’s case, they do not have sufficient if any ability to process their crude oil.  Their best option is to refine their oil at one of the US refineries located on the Gulf of Mexico.  The question is how to get the oil there.  Ship, tank trucks or pipeline?

The case of Mexico is slightly different. Mexico does have refineries but they are only operating at about 70% and the remaining Mexican crude is refined in the US ,Gulf of Mexico shore. Why?  Because the United States imports about 70% of its crude from Mexico. Why would Mexico who’s crude oil comes from the Gulf, ship it back to Mexico when its destined to go to the United States.?  It’s a fact that Mexico’s  crude comes from platforms located on the Gulf of Mexico. It’s a fact that this crude is shipped to the US refineries in the Gulf and then some of it is shipped back to consumers in Mexico.  The logic there is that it’s more profitable for the Mexican government to sell the oil to the US than to the Mexicans. Once they realize that they will be paying a Tariff on the oil, they may decide to sell more oil which equates to lower prices, to their own population.

Based on all of the above information, its reasonable to assume that if Donald Trump wants Mexico to cough up the cost of the border wall that Mexico will do as requested. It’s also a strong probability  that Canada will continue to ship their crude to the Gulf refineries except that now they will pay the United States a fair Tariff and taxes.  It’s also a strong probability that the United States will begin in earnest to explore all other energy options to lessen the reliance on Canada and Mexico’s crude oil.  If the Canadians don’t like the “greedy” Americans, maybe they should build their own refineries.

In any event, new Tariff agreements are needed. Agreements created in the interest of the American people, not created for the elite businesses in the US.

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