Donald Trump has kept presidents Trudeau and Pena Nieto on edge with his threats to withdraw the US from NAFTA. The pivotal trade agreement between the US, Canada, and Mexico, served as a frequent bogeyman for Trump on the campaign trail, and played well to white working class voters in Rust Belt states that were instrumental in propelling Trump to his improbable victory.
Now, however, Trump plans to renegotiate, not rescind, US participation in the pact.
- Read More: Donald Trump Suggests Remaining in NAFTA, with Some Reforms
- Read More: Business Leaders to Trump: Canning NAFTA Could Kill 6 Million US Jobs
As with all things Trump, his rationale is shrouded in controversy. Did he backtrack on withdrawal because of the phone calls from Nieto and Trudeau, or because he was convinced by his secretaries of Commerce and Agriculture that it would be, in fact, his own political supporters who would be most negatively impacted by withdrawal?
Is Donald Trump really against free trade in theory? He claims to support free trade, but suggests that NAFTA does not constitute a true “free trade” agreement, and is a bad deal for the US. However, studies have repeatedly shown that job loss to Mexico is minimal at the hands of NAFTA.
Has NAFTA really been a “job killer”? Most economists would say no. 14 million jobs rely on trade with Canada and Mexico. 15,000 jobs per year are lost to NAFTA.
Even Dean Baker of the left-wing Center for Economic and Policy Research suggest that job loss has only been around 600,000 over two decades. That hardly constitutes the “giant sucking sound” that Ross Perot warned us of two decades ago.
It is troubling to see that the ascendancy of Trump has ushered in a new era of protectionism and anti-free trade sentiments within the Republican Party. However, the more libertarian-leaning faction of Trump’s advisers can celebrate a major victory over recent news that the US will not be retreating from the pact.
Trump may be right that NAFTA includes some unfavorable provisions for the US, and its business interests. But it would behoove him to drill down into specifics, and make such a case.
Fundamentally, however, policymakers must remember that Mexico accounts for more imports from the US than all the BRIC nations combined; and that a strong and economically stable Mexico is critical to American economic vitality.