Publish in Perspectives - Monday, June 20, 2016
Backtracking on NAFTA -- as Donald Trump proposes -- would create massive complications to fully integrated supply chains, reducing efficiencies and eliminating jobs on both sides of the border, the author argues. (Photo: GOP)
Even if candidate Trump is not elected, the toxic, anti-trade, anti-immigration rhetoric of the campaign will linger.
BY ERIC FARNSWORTH
Whether or not Donald Trump is elected the 2016 presidential campaign may nonetheless prove to be an inflection point. For the first time since the Depression, the presumptive presidential nominees of both major political parties have positioned themselves as trade skeptics, particularly with reference to the pending Trans-Pacific Partnership (TPP). Candidate Trump goes further, decrying the North American Free Trade Agreement (NAFTA), the very foundation of US commercial relations with our neighbors and top commercial trade partners Canada and Mexico, as a “disaster” for the United States. He suggests that Mexico is “eating our lunch” and that the only way to make our nation great is to wall ourselves in from outside competition and the wider world. Of course, if NAFTA is no longer a bedrock agreement under a Trump Administration, there is little to suggest that additional existing trade agreements with Latin America and others would not similarly be open for review or abrogation. Such actions would put at risk a foundation of U.S. economic strength and global competitiveness and millions of related jobs.
NAFTA was an innovation in economic relations. It was foremost an agreement designed to increase trade and investment among its three parties through North American economic integration, the better to compete with emerging blocks in Europe and Asia that policy makers anticipated would define global economic relations in the 21st century. But NAFTA was also much more. It was, in fact, the primary instrument that Mexicans sought to support a vision of open market democracy for Mexico, providing that nation with a clear path toward political and economic modernization while institutionalizing an ever-tighter cooperation agenda with the United States.
NAFTA has been a success. Since 1993, the year prior to NAFTA implementation, U.S. trade in goods and services with Canada and Mexico increased from $307 billion to almost $1.34 trillion in 2014. Annual trade between the United States and Mexico has quadrupled (with Canada, it has more than doubled). Canada is the top trading partner of the United States and Mexico is the second largest export market and third largest trading partner. More than 40 U.S. states count either Canada or Mexico as their top export destination. As Mexico’s economy grows, it supports US jobs while offering new opportunities to its own workers; that, coupled with the still-sluggish U.S. economy, has brought net migration flows to the United States from Mexico to virtually zero.
Perhaps more importantly, beyond tangible commercial benefits, NAFTA institutionalized a vision for North America that would have been impossible absent significant political and economic reforms in Mexico, both catalyzing such reforms and also benefitting from them. NAFTA unquestionably supported directly Mexico’s democratic transformation by requiring legislative and regulatory changes that might not otherwise have occurred absent an external catalyst. It empowered new economic constituencies and a growing middle class that has developed an increasingly clear political voice. Mexico’s politics are now more democratic than ever before, and the Mexican people have made clear through the ballot box and recent elections their disinterest in returning to previous ways.
What the negotiators created proved to be an effective framework for ordering the majority of North American trade and investment relations as it then existed, enduring economic stresses, political transitions, and security crises since that time. Backtracking would create massive complications to fully integrated supply chains, reducing efficiencies and eliminating jobs on both sides of the border. It would also threaten to undermine the progress in bilateral relations with Mexico that has been painstakingly, patiently developed over the past generation. Re-creating the possibility of having a wary or even hostile neighbor on the southern border with the United States would significantly reduce cooperation with U.S. officials across the entire spectrum of the bilateral agenda, from immigration to drug trafficking and law enforcement to terrorism. These are not theoretical risks; they are real, reducing cooperation just when the future of the United States is more intertwined with Mexico than ever.
It’s not just Mexico, of course, but to this point Mexico is the one nation in Latin America that candidate Trump has sought to stigmatize. There would be knock-on effects with others in Latin America, including concerns about US commitment and credibility, reliability, and basic questions of partnership. This is doubly ironic: just when much of South America appears to be awakening from populism to a new, more pragmatic reality and is therefore looking for a more balanced relationship with the United States, the United States may be ready to turn its back on its neighbors. Even if candidate Trump is not elected, the toxic, anti-trade, anti-immigration rhetoric of the campaign will linger as a bad taste in the mouths of regional leaders and others, restoring increasingly dormant muscle memory of strained relations. It will also discourage any bold US initiatives toward the region, particularly on trade, at least for the next four years, and undermine the US voice on issues including democracy promotion, human rights, economic orthodoxy, and leadership to address crises including a collapsing Venezuela.
To address pending issues and support US interests, Washington needs regional allies and friends, not adversaries. This is not a game, or a game show on TV. The stakes are high. Much damage has already been done. Continuing on the current path could dramatically deepen the damage to US foreign and commercial policy in the Americas. If candidate Trump is elected president, at least we cannot say we were not forewarned.
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