As we reported here in March of this year, early in his campaign, President Trump advocated the renegotiation or complete dissolution of the North American Free Trade Agreement (NAFTA), and has continued to push that idea since the election. First conceived in 1987, NAFTA was finally signed into law in 1994, and has been very instrumental in increasing trade among the U.S., Mexico and Canada. This tri-lateral agreement has created the largest free trade zone in the world, and $3.5 billion worth of goods cross the borders every day.
The president’s objection to NAFTA is that it has cost the U.S. too many jobs as industries have moved across the borders, primarily to Mexico. On the surface, this appears to be true. For example, 20% of North American auto production takes place in Mexico. On the other hand, NAFTA has resulted in the creation of several million U.S. jobs, a fact that Trump tends to dismiss.
Even as the fourth round of negotiations among the countries is taking place, the president continues to talk about a total termination of the agreement. No doubt emboldened by the U.S. attitude, in late September, General Motors auto workers in Canada went on strike to protest over jobs lost to Mexico, the union’s president calling their experience, “the poster child for what’s wrong with NAFTA.” But it is beginning to look as if Mexico has had just about enough.
Since the presidential election, and even during the campaign, the U.S. seems to have done whatever it can to antagonize Mexico. There is the infamous border wall promise (at Mexican expense), threats of prohibitive duties and entry fees on Mexican made products, and immigration law changes, none of which have been designed to endear us to the Mexican government or citizens. Certainly, there are issues to be dealt with, but there are more diplomatic ways to resolve them. In any event, in a recent speech to a Senate committee, the Mexican prime minister warned that if NAFTA is terminated, it could bring U.S. – Mexican relations to a breaking point. This came after President Trump once again threatened to “tear up” the agreement. Up until now, Mexico has been more patient (publicly) since NAFTA is important to its economy, as well, with 80% of its exports moving to the U.S. However, the prime minister reminded his audience that Mexico was much bigger than NAFTA, and they were prepared to walk away, if necessary.
Last week, Tom Donohue, CEO of the U.S. Chamber of Commerce, told the U.S. – Mexico CEO Dialogue that U.S. exports to Mexico and Canada were worth four times more than shipments to China, and “We’re going to fight like hell to protect the agreement.” Donohue, arguably one of the most powerful lobbyists in Washington, wields a big stick, as does his organization’s membership. A letter signed by over 300 chamber of commerce executives from around the country, was sent to the president last week, insisting that the NAFTA negotiators “do no harm” to the economy. According to the letter, 14 million U.S. jobs are supported by trade among the three countries.
There is no question that NAFTA needs some revision and updating, but to suggest a total termination is a very short – sighted point of view.