The Trump Administration has made no secret that they are not satisfied with many of America’s trade deals. While President Donald Trump has frequently used free trade deals as a talking point, several of his cabinet officials have embraced similar positions.
Secretary of Commerce Wilbur Ross and Trade Representative Robert Lighthizer have jumped on Trump’s train of thought on the subject, which is significant for a couple of reasons.
First, they are the two men who wield the most power when it comes to forming U.S. trade policy and they will also be the chief negotiators at the new round of NAFTA talks.
According to a Politico article by Megan Cassella, these renegotiations began back in mid-August. So far, all sides are trying to take care of less controversial issues before moving on to contentious topics.
Putting aside whether or not NAFTA should be renegotiated, there were several disturbing comments from Secretary Ross. Ross has made it clear he agrees with President Trump, saying there may be a need to leave NAFTA if negotiations do not go well.
“The president has made clear that if they don’t work, he’s going to pull out,” Ross said. “Really, that’s the right thing.”
I cannot say I agree with Trump and Ross on this matter. I do not think they have considered the implications of what a NAFTA withdrawal would do to the U.S. economy. They seem to view a withdrawal as a simple negotiating tactic.
To put it mildly, NAFTA has been an integral part of the U.S. economy for over 20 years.
According to an editorial in the National Review, Mexico and Canada are respectively our third-largest and largest oil suppliers.
Ripping up a trade deal with those countries would drive gas prices much higher, which is just one of the adverse consequences we would face.
Doing away with trade barriers has been helpful in growing the services sector of our economy, which now employs far more people than any other sector. We could also expect to see a reduction in growth for this sector if a NAFTA withdrawal were to occur.
A large percentage of our agricultural exports also go across our southern border to Mexico and this number has increased ever since NAFTA was put in place.
Celia Tortajada in Marketwatch said Mexico imported 17.9 billion dollars in agricultural products from America in 2016.
Some of their most common imports from the U.S. include soybeans, pork, corn and dairy products. Losing access to this market would be disastrous for U.S. farmers, likely causing serious job losses as well as reducing our economic growth.
Based on these examples, it is easy to conclude it would be detrimental for the U.S. to abruptly withdraw from this agreement. The administration may think they are helping Americans by trying to make some changes to NAFTA, but even if those changes do not get enacted, they should not pull the U.S. out of this agreement.
We would have to face the repercussions of this decision for years to come, so using withdrawal as a negotiation tactic is completely inappropriate.
Trump and his subordinates came to power in some part because of how they touted themselves as master negotiators. Unfortunately for them, NAFTA is not a contract for a new hotel or a casino, but rather a complex framework for facilitating free trade between three different economies.