By Michael Taube
Tuesday, November 15, 2016
President-elect Donald J. Trump. It’s for real, but it’s
still hard to believe.
While I’ve expressed concerns about Trump’s candidacy,
I’m taking a wait-and-see approach with his new, impending role. If he’s
ultimately able to work well with the GOP-controlled Congress, it could turn
out to be a successful presidency.
There’s one Trump campaign promise that I would strongly
suggest he drain from his personal swamp: tearing up the North American Free
Trade Agreement.
Trump has been exceedingly critical of NAFTA over the
years. In the first presidential debate, he actually called it “the single
worst trade deal ever approved in this country.”
What’s Trump’s beef with it?
A not-so-insignificant number of Americans, especially in
the Rust Belt region that decided this year’s presidential election, have been
hit hard by NAFTA. Cheap, non-unionized Mexican labor in the auto sector, steel
industry, and agricultural community, have cut into the American dream. Jobs
have been lost, families have been struggling, and people have lost hope.
These are Trump’s voters, the so-called “forgotten men
and women.” When he speaks about putting America First, and bringing jobs back
to the U.S., he’s talking directly to these folks. In turn, they firmly believe
this billionaire businessman and political enigma truly understands them and is
going to help make their lives better.
Trump’s NAFTA strategy is, and has always been, to make
the personal political and utterly demonize deals like NAFTA.
Yet nothing could be further from the truth. NAFTA, which
superseded the Canada-United States Free Trade Agreement in January 1994, has
been economically beneficial to the U.S., Canada, and Mexico.
If you need proof, look no further than an April 2015
Congressional Research Service paper, written by M. Angeles Villarreal and Ian
F. Fergusson.
The two authors, both specialists in international trade
and finance, noted that “NAFTA was controversial when first proposed, mostly
because it was the first FTA involving two wealthy, developed countries and a
developing country.” Many of those fears were never realized, however.
“In reality,” Villarreal and Fergusson wrote, “NAFTA did
not cause the huge job losses feared by the critics or the large economic gains
predicted by supporters. The net overall effect of NAFTA on the U.S. economy
appears to have been relatively modest, primarily because trade with Canada and
Mexico accounts for a small percentage of U.S. GDP.”
That’s true. America’s total combined trade with Canada
and Mexico was less than 5 percent of U.S. GDP before NAFTA was signed, and a
2003 U.S. International Trade Commission study suggested that full
implementation would only result in a total GDP increase of between 0.1 and 0.5
percent.
At the same time, significant trade barriers (mostly
tariffs) between the three nations have been reduced or eliminated. The North
American electronics and automobile markets have been transformed, but are much
larger than ever. New business opportunities and jobs have been created, too.
No one is suggesting that NAFTA is perfect — no trade
deal is. President Trump could try to adjust some sections and eliminate
others, on a point-by-point basis. That’s acceptable, and part of the give and
take of economic arrangements. But ripping up the entire document would be an
unwise decision.
It should also be noted that, while some moderate
Democrats and Republicans have opposed NAFTA, the fiercest critics have been
left-wing nationalists in the U.S. (Ralph Nader, Jesse Jackson) and Canada
(Maude Barlow, Mel Hurtig) who despise the concepts of free trade and
market-based economies.
Even though Trump really isn’t a conservative or a
Republican — or a political ideologue, for that matter — does he really want to
be associated with this fringe element?
Finally, while there’s no doubt that Trump has mostly
singled out Mexico as the biggest thorn in NAFTA’s side, tearing up the
agreement would hurt Canada-U.S. relations. Canada and the U.S. are strong
friends, allies, and trading partners. While your country is certainly larger
and stronger than mine, NAFTA has been to our economic benefit (and
Mexico’s).
My hope is that Trump’s NAFTA threats have been nothing
more than campaign rhetoric. There are far better ways to create more private
sector jobs — including lower taxes for individuals and businesses and tax
incentives for new businesses — than tearing up successful trade agreements and
killing good jobs in the process.
Instead of musing about an “AFTA NAFTA” strategy, Mr.
Trump, please strive to make sure that
NAFTA remains great, as it already is.
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