The North America Free Trade Agreement (NAFTA) among Canada, Mexico, and the United States was put into place in November 1993 with the staunch support of the Clinton administration. A sweeping agreement that lifted major trade barriers among these three nations, NAFTA had its share of problems when it was implemented, including the dislocation of some workers. But the mutual gains from free trade dwarfed any losses associated with the agreement. Now, over twenty years later, NAFTA needs to be updated to take into account new technologies, such as those associated with the digital economy. As the agreement gets renegotiated, all three parties should make as few changes as possible to bring the agreement up to date without altering its fundamental structure. But that might not happen. Each of the three signatory nations has adopted a tough bargaining position that could result in a breakdown of the treaty, which would be the greatest trade disaster in recent years.

The American public seems to be mixed on free trade. On the one hand, during the recent presidential campaign, much of the electorate, including many Republicans, turned against the Trans-Pacific Partnership (TPP), a free trade deal among Pacific Rim nations, while still announcing their support for free trade in the abstract. But upon taking office, Donald Trump proudly but foolishly withdrew from the TPP, and since that time has taken every opportunity to denounce free trade and to express his frustration with NAFTA. Today, his demands on NAFTA, as communicated through his trade representative Robert Lighthizer, have effectively deadlocked negotiations going forward.

Trump’s position is particularly galling because of the total discontinuity between his approach on domestic and foreign economic issues. Just last week, I wrote a column that strongly defended Trump’s efforts to introduce competition and choice into the health care market. The same principles that work to make a domestic economy great apply with equal force to the international one. Giving consumers many choices induces suppliers to provide those goods and services that people want at prices that they can afford; otherwise, the suppliers will lose business to their competitors. To achieve success, firms must not only develop their own workforces, but deal with other firms to acquire the needed inputs, which are often more cheaply purchased than made. Some of these inputs will be acquired from overseas sources, so the objective of a sound trade policy should be a seamless interface between domestic and foreign markets—which is precisely what NAFTA helped achieve when it integrated the economies of its three separate signatories.