The renegotiation of NAFTA is underway, and the first meetings were held on Wednesday. They concluded with a press conference featuring representatives from Canada, Mexico and the United States.
United States Trade Representative Robert Lighthizer came out swinging against the NAFTA deal. “I want to be clear, [President Donald Trump] is not interested in a mere tweaking of a few provisions and a couple of updated chapters,” Lighthizer said, according to CNBC. “NAFTA has fundamentally failed many, many Americans and needs major improvement.”
The Trump administration is seeking changes on everything from country of origin labeling rules to labor standards. It is also criticizing the trade deficits the U.S. runs with both Canada and Mexico.
The White House is insisting that NAFTA has been harmful to the United States. However, the facts show something very different.
According to the U.S. Census Bureau, so far this year, the United States has exported $139.9 billion worth of goods and services to Canada and $118.8 billion worth to Mexico. The U.S. has imported $155.1 billion worth of goods and services from Mexico and $150.4 billion worth from Canada. Canada is America’s largest trading partner, and Mexico is third on the list. Business has only increased from both countries in the more than two decades since NAFTA has been in effect.
Opponents of NAFTA claim that the trade agreement has led to the loss of manufacturing jobs in the United States. They say that lower manufacturing costs in Mexico have led American companies to relocate their factories.
Yet, NAFTA has been a job creator in the United States, too. The Wilson Center found that nearly 5 million American jobs depend on NAFTA and specifically trade with Mexico.
[T]he vast majority of jobs that tangentially depend on trade with Mexico are in the service sector, such as retail, finance, and healthcare. For example, when an American consumer buys a washing machine made in Mexico, he or she can save about $100 since it’s cheaper for American companies to manufacture appliances in Mexico than in the United States. The consumer can then spend that $100 elsewhere, maybe at a restaurant or a clothing store. That money—which is spread across the economy instead of spent on a single purchase—helps keeps people employed in other sectors, according to the report.
What the Trump administration is proposing is not free trade. They want a managed trade pact that only central planners and opponents of the free market would love. Their proposals would increase costs for American consumers while rewarding politically connected industries, the very definition of crony capitalism.
What’s more likely is that, rather than renegotiating it, the Trump administration is laying the groundwork for withdrawing from NAFTA and returning to a protectionist trade policy. And, if they don’t withdraw from NAFTA, Mexico might. The trade deal has strong opposition south of the border. Either scenario would be a disaster for the American economy and even more so for Canada and Mexico.
As the Trump administration renegotiates NAFTA, it’s clear that American consumers are destined to lose.