MEXICAN AUTO PARTS INDUSTRY STRUGGLING TO COMPETE GLOBALLY

Mexico is learning the same lesson that the United States did decades ago - jobs will shift to the lowest cost country that can produce the product at an acceptable quality. In the case of the United States, some of the early production jobs that left the country went to Mexico where wages were a fraction of those paid in the U.S. Today, those Mexican jobs are leaving for even lower-cost countries like China and Honduras. Mexico can seem attractive to companies with wages of $1.50 per hour, but cannot compete with Honduran wages that are less than $1.00 (74 cents for Alcoa workers in that country).

From The Chicago Tribune:

Not so long ago, Mexico floated along as a low-cost producer to the auto parts world. But now its niche is threatened by global rivals who can trump it with lower salaries or superior quality and productivity. As a result, Mexican auto parts firms keep pressing to trim costs, and Mexican workers find themselves working longer, harder and sometimes for less.

Consider Alcoa Inc.'s move into Honduras. Several years ago the Pittsburgh-based firm opened some auto parts facilities with a base wage of 74 cents an hour in that country, according to the National Labor Committee, a small New York-based group that tracks workers' conditions globally. That compares with Alcoa's auto parts operations in Ciudad Acuna, Mexico, where workers' average weekly salaries and other benefits for a 48-hour week come to $76.22, according to company spokesman Kevin Lowery.

WTO INVESTIGATING POSSIBLE VIOLATIONS BY CHINA

From USA Today:

The World Trade Organization opened a formal investigation Friday into allegations by the USA and Mexico that China is providing illegal subsidies for a range of industries, officials said.

The North American countries accuse Beijing of using WTO-prohibited tax breaks to encourage Chinese companies to boost exports, while imposing tax and tariff penalties to limit purchases of foreign products in China.

"China is providing numerous subsidies that appear to be prohibited under WTO rules," U.S. trade lawyer Juan Millan told the WTO's dispute body last month. "China offers tax refunds, reductions and exemptions that discriminate against imported products ... or that subsidize China's exports."

The U.S. trade deficit set a record for the fifth consecutive year in 2006 at $765.3 billion. The imbalance with China grew to $232.5 billion, the highest ever with a single country.

Beijing, meanwhile, blocked a separate probe of its rules for protecting intellectual property rights. But the move will probably only delay the creation of a panel until the next meeting of the WTO's dispute body in September, when Washington can bring up the issue again.

Under WTO rules, a second request for an investigative panel is automatically granted.

COURT DECISION GIVES MEXICAN TRUCKERS GREEN LIGHT TO DRIVE IN USA

From AP via Yahoo:

The Bush administration can go ahead with a pilot program to allow as many as 100 Mexican trucking companies to freely haul their cargo anywhere within the U.S. for the next year, a federal appeals court ruled Friday.

The 9th U.S. Circuit Court of Appeals denied a request made by the Teamsters union, the Sierra Club and the nonprofit Public Citizen to halt the program.

The appeals court ruled the groups have not satisfied the legal requirements to immediately stop what the government is calling a "demonstration project," but can continue to argue their case.

The trucking program is scheduled to begin Thursday.

Canadian trucking companies have full access to U.S. roads, but Mexican trucks can travel only about 20 miles inside the country at certain border crossings, such as ones in San Diego and El Paso, Texas.

The government says it has imposed rigorous safety protocols in the program, including drug and alcohol testing for drivers done by U.S. companies. In addition, law enforcement officials have stepped up nationwide enforcement of a law that's been on the books since the 1970s requiring interstate truck and bus drivers to have a basic understanding of written and spoken English.

The Federal Motor Carrier Safety Administration, the Department of Transportation agency charged with managing the program, said Friday that the court's decision is "welcome news for U.S. truck drivers anxious to compete south of the border and U.S. consumers eager to realize the savings of more efficient shipments with one of our largest trading partners."

However, the agency said it must still wait for final report by the inspector general and for Mexico to begin giving U.S. trucking companies reciprocal access before the program can begin.