Hallelujah! The White House’s position about the North American Free Trade Agreement is finally on the record.
On Monday, July 17, the U.S. government released a 17-page document entitled “Summary of Objectives for the NAFTA Renegotiation.” The list of demands includes the following: the need to examine “non-tariff barriers that constrain U.S. exports to NAFTA countries,” remove “non-tariff barriers to U.S. agricultural exports,” “secure commitments from NAFTA countries to provide fair and open conditions for services trade” and establish a dispute settlement system that is “effective, timely ... [and] transparent.”
President Trump has blown hot and cold about NAFTA for what seems like an eternity. He’s previously called it “the single worst trade deal ever approved in this country” and expressed frustration with the way it has hurt American families and led to cheap, non-unionized Mexican labor in the auto, steel and agricultural sectors.
Yet, Trump told Canadian Prime Minister Justin Trudeau during their bilateral meeting in Washington this February that the U.S. has a “very outstanding trade relationship with Canada,” and his strategy would be nothing more than “tweaking” NAFTA. This was followed by a sudden return in April to his first position, where he mused about starting the six-month process to withdraw the U.S. from NAFTA. He had a change of heart less than 24 hours later and moved back to his previous stance of renegotiation.
That’s the art of negotiation in the Age of Trump. Change course unexpectedly, cause a short-lived tsunami of political turmoil, laugh/shrug it off, return to your original position (sort of) and repeat. While Trump may enjoy this game, he will cause permanent damage to relations with Canada and Mexico if he keeps employing this tactic.
Moreover, Trump needs to realize that things aren’t as bad with NAFTA as he keeps making them out to be.
An April 16, 2015 Congressional Research Service paper also noted that “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” has been “relatively modest.” A 2003 U.S. International Trade Commission study also suggested that full implementation would only result in a total GDP increase of between 0.1% to 0.5% — which is exactly what has happened.
NAFTA has also helped reduce tariffs, enhanced financial sectors like the automotive industry, and created more jobs and opportunities for individuals and corporations.
Yes, NAFTA isn’t perfect. But the record clearly shows it has led to more economic benefits for the U.S. and its trading partners than financial losses.
That’s a far cry from being the worst trade deal of the century, Mr. President.
Some of Trump's frustration with U.S.-Canada trade is understandable. He recently spoke out against Canadian government "supply management" in the dairy sector, which heavily controls product availability and prices. It’s a protectionist policy that goes against basic free market principles and should, in fact, be eliminated.
Canada’s Liberal government doesn’t seem interested in changing this policy and it has legitimate frustration's of its own. Like past Liberal and Tory governments, Canada disputes the United States’ equally protectionist stance in the decades-old softwood lumber dispute and Trump’s economic nationalist rhetoric in his “America First” program with business and trade.
If Canada-U.S. relations are going to remain cordial, cooler heads must prevail now and in the future.
Trump in particular should take the lead. He has to stop acting like a bully and governing by decree of bozo eruptions when it comes to political negotiations with Canada (and Mexico). He also needs to start espousing trade liberalization and rejecting tariffs to open up the free market to greater competition and economic success in North America.
Creating a bigger and better NAFTA would be an important economic accomplishment for the White House. While there’s little doubt the renegotiation process will be slow and frustrating, it must succeed to ensure that the North American economy remains powerful and successful.