Closure

Ok, so you know, I didn't go to church on Sunday. Monday I caught a cold and am still dealing with it. Last night I felt a little better but tonight I'm really feeling it. With HapKiDo coming back tomorrow, I figured I better post something or learn exactly why he's called HapKiDo.


So what I wanted to leave you all with is something that I came across this week. Now some of my numbers may be a little off so I encourage the inquisitive reader to further investigate the issues.


Feb 22nd it was decided that 100 Mexican trucking companies would be allowed to deliver into the United States. This will improve efficiencies at the border but the negative ramifications for the trucking industry are pretty significant. One must know that the Mexican driver on average makes 40% less than an American driver. Here is how things work out:

1st - when the Mexican carrier sends it's driver in to the U.S. it will be operating at a much lower cost than the American counterpart. This difference will then translate into a huge cost saving for a shipper who wants to ship back to Mexico if it were to select a Mexican carrier.

2nd - because a Mexican carrier will more likely be selected than an American carrier, American carriers will have lower freight volumes to generate revenue. That loss in revenue will create a minor to moderate shift in competition among American carriers. This will most likely happen through downsizing of certain carriers who will then, unable to maintain sufficient revenues and profits, be purchased by larger carriers, which in turn reduces competition.

3rd - if, and it's a pretty big if, an American carrier is sent south to Mexico, the revenue needed to bring that truck back to America will be substantially higher than all the other Mexican carriers surrounding it. Mexican shippers will not want to pay the price needed to return the truck back to the states. Therefor, the American carrier is forced to bring the truck back at a loss or with no revenue at all.


These are just three of the observations I can see and I'm no economist or financial wizard but the implications I am seeing are probably pretty recognizable by most. NAFTA, the genesis of this whole thing is, in theory, I think a good thing. But I'm seeing now what I think many saw when the EU was being created. When a superpower like the U.S.A. starts to 'compete' with a country like Mexico, the superpower will lose. Wouldn't you as a consumer and customer rather pay $3.00 for a rake instead of $15.00?


Now I know that there is something to be said for the phrase 'you get what you pay for' but when you are operating on a limited budget, the only thing most people-and companies-consider is how am I going to get 3 widgets for the price of 1. Competition drives down prices. That's a good thing. But when companies compete based on rates, not only do the companies who fail to secure the contract lose, but the customer often times loses as well because they receive an inferior product.


Why, you ask? Because the product provider, now operating on the tightest of margins can't put money back into its operations and has to find other ways to cut costs. This generally means reductions in quality of the raw materials going into the finished goods, reduction in staff which leads to poorer quality of finished goods, and loss of research and developments to further expand product lines.


Bringing Mexican drivers into the U.S. will most definitely improve the Mexican economy but their growth will certainly not add to ours. There may be an aggregate gain but it will happen because of an American loss. Of this I'm pretty convinced.


Now, shift gears and think about the rest of our economy. Did you know that we are an 80% service based economy? Do you realize that our economy is supported by 4 out of 5 business which are based on the idea that Americans need to consume something and yet don't actually produce the item being consumed? If Americans stop consuming, what happens to the economy? I think you see where I am going with this. But let me bring back transportation to the equation. If transportation is hauling product supplied to the economy by only 1 out of 5 businesses and we add a new influx of carriers that can operate at 40% less than their American counterparts, how are we supposed to split that pie? Economically speaking, I'm sure you're saying, "Boy, this guy sure is morbidly obsessed with transportation in the American economy." Fact is, I work in it. So, in the name of self-preservation, I have to be aware of what is happening. But failure to see this kind of thing happening in the rest of the economy, in different sectors (India and call centers ring a bell?), is alarming. As consumers, we are selling, even if by necessity, our heritage as a superpower.


Most motor carriers operate on a 2-7% margin. If that's all a kid made off lemonade, there would never be a cup of lemonade sold again in America's neighborhoods.


Now, everyone please welcome back - HAPKIDO!!!!