The North American Free Trade Agreement (NAFTA), which went into effect on Jan. 1, 1994, was an extension of an earlier trade agreement with Canada and was ratified and signed by President George HW Bush before taking effect during the Bill Clinton administration. It was always controversial — Ross Perot, an independent (“Reform Party”) candidate in 1992, famously referred to the “giant sucking sound” of jobs going from the U.S. to Mexico as a result of the agreement, which was at that point a done deal that had not yet had an impact. 26 years later, it is still controversial. Many analysts (all over the political map) point out that the U.S. economy has continued to add jobs while NAFTA has been in effect — it is indeed very hard to argue that there would have been a lot more jobs without NAFTA, given the continued expansion and historically low unemployment. And NAFTA appears to have had its desired effect, because the North American share of international trade increased.
But critics continue to say that NAFTA has failed, and President Trump called it the “worst trade deal ever for our country” and, after he took office, “one of the worst deals in history that anyone in history has ever entered into”. All right, we do know he exaggerates a little — there was the Munich Pact with Hitler, and a long list of other notoriously bad ideas. But NAFTA must be really bad, right?
Since I am convinced that free trade is necessary, that politics tends to distort economic reality, and that basically trade agreements increase economic prosperity while shifting jobs to low-cost markets, I decided to review the 1458 public comments received by the U.S. Trade Representative (USTR) on NAFTA as part of the effort to negotiate a better deal. I found that most businesses, particularly agricultural exporters, had positive comments about NAFTA, wanted to keep its main provisions in place, and had suggestions about potential improvements. I found that nearly all the public comments from individuals were negative, and if there was any common thread it was just that it was bad for the U.S. I would say that the comment below (again, this is a public submission to a U.S. agency that is part of the Trump administration, in 2017), is typical:
What would result from YOU’RE stated goals?
Further suppress wages and leveling of Mexican, Canadian, and U.S. economies
Unelected foreign bureaucrats regulating businesses and entrepreneurs
Expanded and aggressive enforcement of bureaucratic environmental and business regulations
Merger of police and military for North America
We know what you CFR globalist are doing in trying to peacemeal AGENDA 21 into our country,i.e.repeal & replace our Declaration of Independence, Constitution & Bill of Rights. It’s not going to happen & you will be stopped.And we will do everything to make sure Trump fires you as soon as possible
I have to point out that this public comment is directed to the USTR, who is tasked by the President with renegotiating NAFTA. If you were the USTR, what would you do?
One of the reasons that bureaucrats listen to U.S. businesses, such as soybean growers who have benefited immensely from trade agreements (their exports to Mexico doubled under NAFTA), is that it is hard to understand what the public wants. When I had my Department of Commerce appointment, I read thousands of public comments about rules and policies when we requested comments (which was often) about something we were enacting. Very often they were like the above. We really tried to understand where people were coming from, but it was often hard to act on it. I had one man who repeatedly called my home; he got more attention than any other public citizen and we were sympathetic to some of his views, but he is only one man and he did not express himself very well–except that he was always very, very angry.
People are very angry about NAFTA. The president is angry, people from factory towns where jobs have decreased are angry, and other people are angry for many reasons, like that CFR (Council on Foreign Relations) is trying to repeal the Declaration of Independence. There’s actually a remarkable amount of research involved here. The CFR is an independent think tank that is generally free trade, so it’s perceived as being against President Trump’s policies, so it must be part of an anti-American conspiracy? If only everyone gave NAFTA this level of consideration. But to any bureaucrat this will be confusing. Most anti-globalists are essentially anarchists — they don’t want to have any government or any business interfering with what they do, but this anti-globalist seems to be ok with the President deciding. And the President wants to renegotiate NAFTA.
The last renegotiation of NAFTA was done by President Obama. Because Mexico and Canada were both parties to the Trans-Pacific Partnership (TPP), some of its provisions were considered modernizations of NAFTA, particularly with respect to security, human rights, and intellectual property. But the U.S. withdrew from the TPP, so we are back to square one.
With TPP, I don’t think there is any real prospect of getting a better deal. We withdrew, the 11 other nations dealt us out, and it is simply too complicated to try to negotiate separate trade agreements with everyone and expect that it will leave us ahead with China in the end. Politics hurt us. With NAFTA, it’s different. We have a deal, and it’s been working effectively for over 20 years. And China isn’t really as much in the picture. It’s really much more nuanced. The USTR will do its job, and then the President simply has to declare victory. He will say we’ve got a better deal, thanks to him. Where does that leave everyone else? Probably about where we would have been otherwise. But if it calms some people down, we are victorious. I just hope the soybean growers aren’t upset.