Sunday, February 17, 2008

Anti-NAFTA Themes

Chris Kromm encourages us to call NAFTA what it is: "global investment deals" (rather than "free trade") that cost Tennessee 25,588 jobs from 1993 to 2005. He also has a great breakdown on where Obama and Clinton stand on NAFTA, including the embracing of John Edwards' anti-NAFTA themes by the candidates since he dropped out of the running.

If the political currents are running against these global investment deals, I don't see where a pro-NAFTA Democrat like Governor Phil Bredesen (who is touted as a VP candidate) fits into any future Democratic administration. Bredesen is one of those who impugns any economic development critic for being "idealist," while scolding that "these deals have to be made."


  1. There's one extremely critical NAFTA issue that all of the parties, pro and con, have either ignored or dodged. The issue is the denial of Mexican mandated labor and human rights by the US companies of the hapless Americans relocated to work in Mexico. The resulting total contingent liabilities owed by the thousands of US companies in Mexico will probably eclipse the corporate indiscretions of Enron.

    Recently (2007), the Mexican Supreme Court upheld a lower courts adverse rulings against Halliburton. These two rulings shed light on the despicable practices by US companies to defraud compensation, evade payroll taxes, avoid social security levies, and reject minimal workplace safety measures - to name a few.

    The Halliburton rulings are just two of a long litany of comparable rulings dating back to the 1930's. The abuse is not unknown to the Mexican Government that accedes to the corrupt influences of NAFTA and Maquiladora industry representatives.

    Why would the US companies commit such indiscretions? Money - lot's of money. By denying Americans their civil and labor rights, the US companies can work the Americans for costs less than indigenous personnel. Does the term indentured servitude ring a bell?

    Estimates place the abuse of the Americans working in Mexico at c. $4.5 billion dollars yearly. Furthermore, the US companies avoid payment of c. $2.5 billion in taxes, fees and levies to the Mexican and US Government’s. To recoup lost corporate revenues, the Mexican Government has levied a personal income tax against the hapless Americans. The $6 billion to $7 billion dollars in proceeds benefits the executives of the US companies who receive lucrative promotions, raises, bonuses and stock options as rewards for their activities.

    American citizens are injured when they lose their jobs because US executives decide to succumb to the temptations of dishonest higher profits and export their jobs. But, this is not the only wrong. American manufacturer’s who’ve not succumbed to temptation, must compete with intentionally undervalued goods made by the scofflaw US companies. The American consumer is wronged when they’re duped into buying purposely undervalued goods believing they’re made by honorable US companies.

    Why would the US companies leave themselves open to redress for their dishonest activities? Obscurity. The activities have gone on for more than seventy years. But, the last forty years has shown a dramatic growth. Yet, no one has raised any objection. The hapless Americans are not told their rights by either their employers or the Mexican Immigration or Labor Departments. If one or more of the Americans happens to learn of their rights and they seek redress through the corrupt Mexican legal system, they are rewarded, if lucky, with a ruling that only they can levy. The Mexican Government is charged with the responsibility of enforcing the laws – the courts have little recourse.

    The US companies are protected by a duplicitous Mexican Government, complicitous industry representatives, and uninformed American workers in Mexico. Representatives of the executive and/or the legislative branches of the US Government dodge the issue because it will either impact corporate donors and/or upset a growing segment of American voters.

    The President and Congress need to suspend all connections with the scofflaw corporations and their rapacious executives until all corrective actions have been taken. The Federal law enforcement agencies need to gather the evidence necessary to pursue charges of fraudulent transfer pricing schedules, fraudulent US Customs valuation reports, false financial reports, and false Sarbanes-Oxley reports. All of these deceptions lead to underpayment of US and State taxes, fees and duties and Mexican taxes, fees and duties.

    The US Supreme Court ruled in Pasquantino vs. The United States that intentionally unpaid foreign taxes are an offense of the RICO laws of the United States. In the United States vs. The Palumbo Brothers, the court ruled that the use of the mails and wires in furtherance of payroll fraud is also a RICO offense. Most of the US companies use the mails and/or wires to gather and transmit payroll and tax data. The mails and/or wires are further used to remit payroll and taxes.

    To mitigate the actions to be brought by the US Attorney, the US companies should be required to remit all earned monies, including interest, to the unfortunate Americans who’ve worked in Mexico. The US companies should also deduct the appropriate Mexican and US levies from the earned monies and interest and remit this sum with the US companies adding late filing charges to the US and Mexican Governments. The US companies should also compute all relevant Mexican and US corporate levies, including late filing fees and interest, and remit these sums to the Mexican and US Governments. The mitigation of the consequences expected to befall on the culpable US executives should depend on the repayment of all dishonestly earned rewards.

    The billions due the Mexican Government will do much to; restore the pensions due retired Mexican workers, reinstate and expand the medical services provided to Mexico’s citizens, revive and enlarge the investment in the education system, provide decent wages for Mexico’s beleaguered law enforcement, and upgrade Mexico’s infrastructure. This will go a long way toward re-establishing credibility with Mexico’s poor and provide them with the jobs they so desperately need.

    The billions due the US and State Governments will do much to restore their fiscal security and relieving pressures to cut essential services and raise taxes. If the scofflaw US companies had fulfilled their responsibilities from the beginning, many of the ills facing the US and Mexico would not exist or would be ameliorated to a point of irrelevancy.

    A salient point is that CAFTA and the other free trade agreements (FTA’s) are patterned after NAFTA. They have the same loopholes and ostensibly the same dishonest objectives. Otherwise, why was President Bush seeking fast track with its secretive aspects? If the FTA’s are not repealed, the age of the “Ugly American” and “Banana Republics” will return.

    For those who want to access the two Halliburton rulings, first go the Mexican Supreme Court website @ Next, click on “Actividad Jurisdiccional”, then click on “Jurisprudencia”, then click on “IUS 2006”, and then click on “BUSQUEDA POR NUMERO DE IUS (TESIS).” Next input 182067 or 182068 into the space and press “BUSCAR.” When the synopsis appears, click on the underlined number. Viola!

    James Sieglitz

    San Diego, CA


  2. Mr. Edwards was right to a certain extent in his August 2007 speech regarding NAFTA. Mr. Edwards failed though to point the fickle finger of fate at Pres. Clinton for emasculating the enforcement provisions of NAFTA. The NAFTA treaty drafted by the Bush Administration contained formidable enforcement provisions that allowed affected parties of one NAFTA country to file and pursue actions for violations committed in another of the NAFTA countries. The rewrite fostered by Pres. Clinton removed all substantive enforcement provisions NAFTA now prescribes that the accused NAFTA country is charged with investigating itself and if culpable pursuing legal redress. In otherwords, the Fox (Presidente) is in charge of the hen house.

    The lack of meaningful enforcement provisions has led to NAFTA companies violating the civil and labor rights of American employees working in Mexico. A Mexican Court recently ruled that plaintiff American employees had been defrauded out of compensation equal to 69% of their base pay. The enforcement of the ruling was deterred when a higher court ruled that although the interpretations of the Mexican Constitution, Labor and Tax Laws were correct, the enforcement of the ruling would be precluded because incriminating questions were asked of U.S. company executives and officers during cross examination.

    The Governments of the other NAFTA countries refused to intercede because the issue was a domestic affair of Mexico. Albeit that the affected parties were American. There are more than 4,000 U.S. companies with operations in Mexico. These companies have more than 100,000 Americans working in Mexico. That other U.S. companies are potentially conducting themselves in a like manner is underscored by two recent Mexican Supreme Court (SCJN) rulings. The actions pertained to like issues in the previously mentioned ruling pertaining to fraud of 69%. The SCJN rulings were favorable to American employees working in Mexico for Halliburton.

    The cheating of compensation at the rate of 69% of base pay amounts to billions of dollars each year. These are manufacturing costs not incurred and evaded costs that are distributed as bonuses and raises to scofflaw executives and officers of offending U.S. companies. The resulting undervalued Mexican goods are imported to compete with articles made by fully compliant American manufacturers.

    The defrauded monies also failed to pay Mexican Social Security Taxes. There is a bilateral tax treaty between the U.S. and Mexico. The failure to pay owing compensation means social security taxes were avoided. The hundreds of millions in social security taxes are sorely needed by Mexico. But, Mexico needs the employment provided by the NAFTA companies so they keep quiet and let their populace suffer treatable health problems. The result in part is the poor Mexicans sneak into the U.S. not only seeking work - they're seeking health care.

    There must be U.S. companies with operations in Mexico that are law abiding and conscientous. The problem is that those that are not are ruining it for those that are. NAFTA could work, but the participants must all be law abiding and conscientous. We've seen too many scofflaw U.S. companies to believe in miracles.