Silke Jasso
President Donald Trump claimed repeatedly on the campaign trail that the United States is being beaten in trade. His favorite trade deal to rail against is NAFTA, ratified in 1993 by the U.S., Canada and Mexico. NAFTA opponents claim the deal has led to American jobs being exported to Mexico.
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But President Trump has opted not to pull out of NAFTA entirely, at least for now. Instead, he wants to renegotiate it. The Trump administration recently sent a letter to Congress—that they’re now walking back—outlining what they intend to pursue in renegotiation.
From Reuters:
The Trump administration will seek changes to the North American Free Trade Agreement (NAFTA) allowing it to reimpose tariffs if a flood of imports from Canada and Mexico causes “a threat of serious injury” to U.S. industry, according a draft document sent to Congress.
The administration also will seek to eliminate a requirement in the 23-year-old trade deal that anti-dumping and anti-subsidy disputes be settled via a special dispute panel. Some U.S. industries, including lumber, have complained that the mechanism is ineffective in stopping unfair subsidies.
The objectives are contained in a draft notification letter circulated by the U.S. Trade Representative’s office to members of Congress for review. The letter, seen by Reuters, is part of the legal process required to launch negotiations to revamp NAFTA.
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The Trump administration will also seek rules on currency protections, public purchasing changes that will allow them to “buy American,” restrictions on government-owned corporations, and intellectual property restrictions. Many of these features were in the Trans-Pacific Partnership, a crony trade deal that promoted certain special interests over opening up markets and that Trump withdrew the United States from early in his presidency.
The “anti-dumping” measures that Trump is seeking in his NAFTA rewrite are borne out of economic illiteracy and will harm consumers. Dumping is an economic term for when a country exports goods that are priced intentionally low, often below the cost of production. It’s controversial, yet in 1995, the late economist Murray Rothbard asked this simple question about dumping: “Why should it be a matter of complaint when consumers so clearly benefit?”
Rothbard went on to address the issue of government subsidizing dumping: “But again, we should still welcome such an absurd policy. If the Japanese government is really willing to waste scarce resources subsidizing American purchases of Sonys, so much the better! Their policy would be just as self-defeating as if the losses were private.” Likewise, if Canada wants to subsidize the clear cutting of their forests to flood the U.S. lumber market, let them!
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The ones who actually pay tariffs are American consumers. Foreign companies simply pass the costs on to them. The ones who get “protected” by tariffs are often politically connected companies. Ditto from “buy American” rules.
Trump’s renegotiation will hurt American consumers, and help the Washington cartel and their allies. Actually, that sounds like a lot of his domestic agenda as of late.
