While re-examining America’s relationships with several nations, usually by shaking their foundations, President Donald Trump is including our nearest partners. He suggests the United States is being cheated by Mexico and Canada.
The three nations will start renegotiations next month on the North American Free Trade Agreement. Yet Trump has tossed in a stink bomb, telling a rally last week, “I think we’ll end up probably terminating NAFTA at some point . . . I personally don’t think you can make a deal without a termination.” A sentiment he reiterated yesterday in Springfield, Missouri.
Economists disagree as to whether Ross Perot was right about NAFTA in 1992. The billionaire independent presidential candidate predicted it would cause a “giant sucking sound” of U.S. jobs being vacuumed up by Mexico. When President George H. W. Bush negotiated NAFTA and signed the accord that year, he was willing to risk that some factories might close or move. But he and President Bill Clinton, who finalized the terms in 1994, were confident the result would be a powerful trading bloc. There would be practically no tariffs or trade restrictions among the trio, and companies in the three countries would have a good chance of beating their competitors on quality and price.
NAFTA was, among other things, a reply to the growing power and potential of the European Union. If dozens of countries across the Atlantic were teaming up to beat the United States in global markets, North America’s best chance of winning was to form an even more formidable team.
Just because Trump says NAFTA was the “single worst trade deal ever,” that does not make it so. There is no indication that he studied the matter, instead formulating a policy based on his impression that Mexico outnegotiated the United States.
During the campaign, Trump also condemned the Trans-Pacific Partnership as a “disaster” for American workers. TPP was supposed to allow the United States to cooperate with 11 nations, mostly in Asia, while boxing out China. Trump made it sound as if the Chinese would benefit from the deal. And three days after taking office, Trump pulled out of TPP.
The withdrawal appeared motivated by a desire to fulfill campaign promises, but to be fair, there is a serious push to renegotiate individual trade deals. Trump claims that unilateral talks will produce better results than multisided accords that “kill American jobs.”
Yet when it comes to the loss of millions of manufacturing jobs in the United States since NAFTA was launched 23 years ago, many economists have a different explanation. They do not blame trade deals. They blame efficiency.
American factories can produce more cars, aircraft, medicines, and agricultural equipment with fewer workers. Manufacturing processes have vastly improved — for the owners, because a sizable percentage of the labor force is no longer needed with robotics.
There are markets where U.S. manufacturers and workers are right to feel cheated. Steel comes to mind, as foreign steel-makers enjoy currency manipulation by and subsidies from their governments. China has expanded its steel exports.
Trump administration officials feel that by threatening to tear up trade agreements and insisting on renegotiation, they can win better deals. They hint at imposing tariffs and restrictions on buying products from China, Mexico, and perhaps other countries. The administration is risking a set of trade wars, but the tactics reflect the bellicose nature of a president who swore to fight for U.S. workers.
In the world of Barack Obama and Hillary Clinton, all nations were meant to be winners by cooperating. Trump rejects that as kumbaya-style naiveté. It is too early to know whether he is right.
Dan Raviv is the Washington correspondent for i24News television and author of books on foreign relations.