NAFTA Re-negotiations: Do No Harm
June 26, 2017 9:49 PM
U.S. Commerce Secretary Wilbur Ross told the Bipartisan Policy Institute the other day that the Trump administrations position on renegotiating the NAFTA Agreement was to “do no harm.”
His comment was preceded by a panel of manufacturers and farmers who agreed that any action taken to downgrade or abolish the Agreement would be a disaster for the American economy. That the farming represented were actual family farmers, not reps of conglomerate agribusiness, gave their assessment even more credibility. They explained how much they’ve come to depend on Mexico and Canada as export markets, and how many downstream businesses in their states rely on the continued, tariff free flow of agriculture products.
This was welcome news by the event’s mostly pro-trade Washington, DC audience and press representatives, as was Ross’s declaration about avoiding doing harm. Even though renegotiating NAFTA, which the administration notified Congress it intends to do as soon as possible, and is in the remit of the U.S. Trade Representative (USTR), Ross and his Commerce colleagues are expected to play a major role.
To show how “do no harm” may still include successful calls for reforms that help select U.S. industries, Ross is believed to have negotiated a side deal with Mexico that increased prices on Mexican sugar exports to the U.S. The U.S. sugar industry is believed to have asked the administration to intervene on its behalf. It did, and the Mexicans’ position to resist such pressure quickly crumbled. As a result, U.S. intermediaries and consumers will pay more for sugar. How this leads to more American jobs and free trade in agriculture products is anyone’s guess.
Novelty of NAFTA
NAFTA was supposed to make these bilateral deals obsolete. But the opposite may happen. Yes, NAFTA may not be perfect, but it has created the world’s largest free trade area of 450 million people, according to the CIA World Factbook 2016. It notes that NAFTA is “an economic powerhouse of $22.47 trillion, as measured by gross domestic product. That's because it links the economies of the United States ($18.5 trillion), Canada ($1.67 trillion), and Mexico ($2.3 trillion). That trade area is greater than the economic output of the 28 countries in the entire European Union.” The U.S. economy is the biggest by far, and the Trump administration seems ready to use size as a means to by-pass the Agreement without actually changing it. Anxious to avoid a trade war, Mexico quickly relented on the sugar issue.
From 1993-2015, trade between the three members quadrupled, from $297 billion to $1.14 trillion. That has boosted economic growth, profits, and jobs for all three countries. It also lowered prices for consumers. This is a tremendous success by any measure, and it would be unwise to mess it up now, especially since many of the U.S. imports, especially from Mexico, are exported to the U.S. and return in a more finished state.
Any renegotiating, should leverage the work done on the now abandoned Trans Pacific Partnership agreement, which Trump torpedoed. There were many widely supported features of that agreement that could bring NAFTA up with the times. Enhancements include better IPR protections, e-commerce, state-owned corporations, technical standards and more open service markets, among others.
Ross asked about a timetable for completing negotiations, and he said by the end of the year was likely. However, with Mexican elections pending before them, and the tendency of negotiations to drag, sometime next year is a more realistic timeframe.
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