The auto industry.

The statistics are so incredible as to be almost unbelievable. The Big Three automakers, direct employers of hundreds of thousands of American workers, are hemorrhaging colossal sums of money and laying off workers in droves. Last year Ford alone lost $12.7 billion; Chrysler lost only $1.48 billion, but it was enough for Germany's Daimler to start looking for a way to divest themselves of their unstable American partner. The huge losses are leading to equally large layoffs. Ford, for one, is laying off over 30,000 employees in North America, many of them in the United States, and is closing a number of U.S. factories. The controversial closure in Atlanta, long the home of Ford Taurus production, came despite the fact that the plant "has ranked among the top 10 most productive assembly plants in North America, as reported by Harbour Consulting," according to a Ford Fact Sheet. Like Ford, General Motors is cutting 30,000 jobs and closing a number of U.S. factories.

The problems of the Big Three can't all be attributed to NAFFA. But while Americans lose high-paying jobs in the auto industry, Mexican workers who are paid much, much less can expect more work. In 2005, in the midst of losing $10.6 billion, GM was ramping up the production of trucks at its Mexican factories. "We're short on trucks. Dealers don't have them in all the colors and with all the options that people want," Gilbert Duhn, a GM manager, told the San Antonio ExpressNews. "We've started building more trucks in Mexico."

Ford is doing the same thing, producing its new family of midsize cars, including the Ford Fusion, Mercury Milan, and Lincoln Zephyr, at its Hermosillo plant in Mexico. In fact, Mexico has become a major center for the manufacture of cars and trucks that are intended for sale in the United States. According to Business Week, "Three-quarters of Mexican-made vehicles are exported to the U.S., largely by Detroit's Big Three but also by German giant Volkswagen." Those are cars that could have been built in America by Americans.

In the face of recent catastrophic losses, the pressure on U.S. automakers to move to a low-cost environment may be overwhelming. In a May 2002 paper, Korean economist Ho Yeon Kim pointed out that Mexico has always had low "site costs" (defined as "low wages, amenities and taxes") and that NAFTA had significantly lowered Mexico's "situation costs" (defined as costs for transport of raw materials and finished products), but that Mexico would not be attractive for small-car production unless other "non-tariff barriers" were overcome or reduced. The increased production of GM trucks and Ford midsize sedans in Mexico suggests that, under the current business climate, Detroit no longer views those "non-tariff barriers" as impediments to Mexican production. So while the loss of tens of thousands of jobs in Detroit's U.S. factories may not have been directly caused by NAFTA, they may be prevented from ever returning to the United States--largely because of NAFTA.1