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What Is Happening with Trump and NAFTA Is a Pretty Much a Waste of Time
From the New York Times today:
President Trump said on Thursday he had agreed to pleas from the leaders of Canada and Mexico not to withdraw immediately from the North American Free Trade Agreement, but he warned he would still pull the United States out if he could not negotiate a better deal.
“I received calls from the President of Mexico and the Prime Minister of Canada asking to renegotiate Nafta rather than terminate,” Mr. Trump said on Twitter. “I agreed…” Moments later, the president added, “…subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good — deal very possible!”
Mr. Trump’s posts showed once again his taste for high-stakes deal-making and his willingness to reverse himself. Only hours earlier, the president’s aides put out word that he was likely to sign a directive starting a six-month clock to end the trade agreement.
Certainly some on Wall Street found alarming the initial news flash that the president was going to sign an executive order beginning the withdrawal process. Investors had begun to accept the idea that while they might not be getting mega-fiscal stimulus, that was balanced off by less concern about protectionism. The WH not labeling China a currency manipulator was a good sign in that regard. And the tiffs with Canada over dairy pricing and lumber are considered minor.
But a NAFTA pullout would be a big deal, a story of higher tariffs and broken supply chains, notes this Quartz piece. Now we’re back to the idea that withdrawal threats are part of the negotiating process. Again, the NYT: “As a practical matter, it is not clear if Mr. Trump’s position has changed that much. During the 2016 campaign, he said he would seek to renegotiate Nafta, and pull out if he could not rework it to his satisfaction. That is essentially what he said on Twitter on Thursday morning.”
Hmm. Maybe now is a good time to recall that the abandoned Pacific trade deal provided for a big update of NAFTA. Economist Jeffrey Frankel:
Is renegotiating Nafta to cover new issues, strengthen labour and environmental protections, improve dispute-settlement mechanisms, and include more countries all pie in the sky? Would it be impossibly difficult to negotiate a new agreement that had every one of these desirable properties? Well, trade negotiators already hammered out precisely such an agreement. It was called the Trans-Pacific Partnership, which Trump has nixed. In truth, the best way to improve Nafta would be to return to what was agreed to in the TPP.
Indeed, the Obama trade office outlined just such a case when it was pushing the TPP. Anyway, NAFTA has hardly been a disaster for the US economy. Far from it, as I wrote the other day, including the above and below JPMorgan charts.
Peter, I have to say — I am very wary of China’s sudden assuming of traditional Foreign Policy mantle and responsibilities in N. Korea. I’ve been reading extensively about the new Philippines president — and the undertones of old animosity are plainly heard by these (frankly paranoid) ears. I am a man who hasn’t had a good feeling since the 90s — so excuse my chicken littling — still I can’t help but think a pernicious grift is a foot.
Then again, I used to have horrible nightmares about the Noid as a kid. And I imagined to avoid him nonetheless.
Lotsa charts. Always charts.
A proud man who lost his job looks in the mirror and sees the picture of his baby girl wedged in the side. A wife who left because he couldn’t provide anymore. He sees the piles of bills and the foreclosure notices and puts his hands to his head and wails to God ,”why oh why, I was a good man”. He falls to his knees in front of the dresser that has his old useless work clothes and finds his cheap hand gun and swallows a bullet. Blood drips out around the grey matter and skull.
Shall we cover his corpse in charts ? Yes. Always the charts for they hold all the answers. Maybe those charts will help his family now.
The administrative state is the problem, not NAFTA or China. These, like the current account deficit and the external debt, deteriorating income distribution, outsized new wealth, spreading poverty, deteriorating race relations and slow growth are symptoms. If we lose important segments of conservative support for the rule of law, decentralization and freedom we don’t have much of a future so the debate about protectionism is important. It is the oldest debate in political economy. Indeed, “The Wealth of Nations” was written to address the issue. In spite of the total absence of evidence that mercantilism, the administrative state, protectionist regimes, progressivism, nationalism, whatever each generation calls the policy, actually improve a nations economy, it’s people’s livelihood or human flourishing, the debate never goes away. We have the same history of arguments with new technology going back just as far. Change is disruptive at all levels and rapid change can be devastating whether that change comes from trade from the next city, the next country, a new technology or excessively talented and hard working immigrants, as were the Chinese. The problem is when we try to slow it down, reduce it’s impact the tools we must use are tools offered by the administrative state, and these are at the center of the problem. Our regional and bilateral trade agreements were crafted by the administrative state so they are flawed, they try to extend our problems to our trading partners and the more effort we put into these things the worse they get. So the folks who do not like NAFTA or who oppose the TPP are not wholly wrong. But the issue is very difficult especially for us. But our focus must be on domestic adjustment because that is what we can control and that is what we can use to address the problems at the heart of everything, the expanding administrative state. Once we have more competitive flexible free, decentralized markets we can engage in global trade negotiations starting with the WTO and its promise of the rule of law and negotiations that will look more like Roosevelt/Truman’s efforts through GATT. And simultaneously begin a back fire by opening up regional trade agreements so that countries who truly want full access to our market can join us in what would be a free trade area. We can begin the trade talks at any time, but must keep our focus on the administrative state because that is the heart of the problem.
And this is because NAFTA? I don’t buy it. Your hypothetical anecdote appears to be little more than someone saying “stop using facts and figures to counter ‘my truth.'”
What’s with Pethokoukis’s obsession with NAFTA these days..? And I agree with @docjay on the charts, they don’t tell the whole story. You can cherry pick charts just like you can cherry pick any statistic to back-up your opinion.
Do you think if we have a more centrally planned economy with the government determining who can produce what, and how much it should sell for, that we can ensure that no company will ever close and nobody will ever lose their job? Generally speaking, the countries that try to control their economies have more stagnation and less employment.
Such are the wages of Trumponomics.
What I’m saying about the charts is not to piss on me and tell me it’s raining. James likes NAFTA and thinks it’s good. He liked Hillary too.
There’s a heap of working or formerly working people who don’t like NAFTA and in fact the scenario above is not hypothetical but a former patient. I’m not sure what he said to a mirror or what exactly he was thinking but he indeed lost his job, his wife and in the end took his own life.
Every now and then you get a call from a cop or coroner in the middle of the night. This one involved my name on some pill bottles for Prozac and Xanax. I think this one was about 2001.
So what I’m saying is that James is one of the legion of economic social scientists who have brought us to the financial precipice and a few charts don’t change ‘my truth’. Thanks for the straw man though.
No I don’t think those things. Any of them. Then again what any of us think means next to nothing and we will inevitably end up with central planning.