Tag: nafta

Senate Approves USMCA

 

On Wednesday, Trump signed “phase one” of a China trade deal that increases agricultural exports to Beijing. Thursday, the US Senate passed the US-Mexico-Canada Agreement by an 89-10 vote.

The House sat on the USMCA for months, distracted as it was by Russia, Trump’s tweets, World War III, Ukraine, Net Neutrality killing the internet, recognizing Jerusalem which destroyed the middle east, Jussie Smollett, the wholesale slaughter of the Kurds (well, those not already dead from Net Neutrality),  and Greta Thunberg’s sailboat. Despite being controlled by Democrats, the trade bill passed the House 385-41. Now it awaits the President’s signature.

The USMCA will replace NAFTA, including stricter rules on labor and car parts and loosens Canadian dairy markets. Canada still needs to approve the agreement once Jussie Trudeau takes off his makeup.

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We recently had a great conversation with trade expert, Clark Packard of R Street Institute. We discuss the lifting of the steel and aluminum tariffs on Mexican and Canadian imports, the prospects for ratifying USMCA, and the tools available to address Chinese trade abuses. Packard lays out his case that the US has more tools […]

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After protracted smashmouth negotiations, the United States, Canada, and Mexico agreed to replace the North American Free Trade Agreement (“NAFTA”) with the new United States Mexico Canada Agreement (“USMCA”) on November 30, 2018. The new USMCA is largely NAFTA with certain positive elements drawn from the Trans-Pacific Partnership (“TPP”). Unfortunately, certain new protectionist provisions unnecessarily […]

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A few weeks back, I threatened promised to tell you the one about the BDAN baño. Due to a clerical error, I find myself needing able to roll out this tale, for your enlightenment this fine fall weekend. It is a tale of three governments, earnest bureaucrats, a rich U.S. NGO, an innovative Arizona policy center, and outside […]

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Last week, the United States and Canada failed to reach an agreement on the ongoing NAFTA 2.0 renegotiation. Going into last week it was widely expected that any NAFTA deal would need to be concluded by the end of August. Nevertheless, Canada and the United States resume talks this week. Instead of closing the deal […]

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The Looming NAFTA Disaster

 

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.

Ian Tuttle of National Review and Greg Corombos of Radio America are cautiously optimistic as an amendment to the GOP health care bill gives more power to the states and brings more conservatives on board.  They also discuss President Trump’s willingness to renegotiate NAFTA, and Ian explains why he’s concerned about Trump’s approach.  And they dive into the effort by Democrats in California to bar businesses from future state contracts if they help to build a border wall.

Richard Epstein warns of the dangers of Donald Trump’s position on international trade, and considers controversies about trade deficits, the border adjustment tax, and job losses due to automation.

Richard Epstein analyzes the major initiatives on health care, trade, immigration, regulation, and crime coming out of the first week of the Trump Administration.

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In the wake of Donald Trump’s election, the Mexican stock market and the peso are down. Between fears of increased tariffs and of a renegotiated NAFTA, Mexico’s economy is on hold. Should Trump follow up on his promises to curtail trade between the U.S. and Mexico, expect to see a new flood of immigrants heading north long […]

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If You Think Trade Deals Have Ruined the American Economy, Reconsider

 

TradeIf you think America’s fundamental economic story over the past few decades is a narrative of decline due to bad trade deals — especially the North American Free Trade Agreement — then you must completely ignore economic consensus.

Some key paragraphs from the new CBO study on trade deals:

In CBO’s view, the consensus among economic studies is that PTAs [preferential trade agreements] have had relatively small positive effects on total U.S. trade (exports plus imports) and, primarily through that channel, on the U.S. economy. The effects have been small because the agreements were mostly between the United States and countries with much smaller economies and because tariffs and other trade barriers were generally low when the agreements took effect (see table below). PTAs have had little effect on the U.S. trade balance (exports minus imports) and have slightly increased flows of foreign direct investment, mostly by encouraging additional U.S. investment in the economies of member countries. As a result, the indirect effects of PTAs on productivity, output, and employment in the United States have also been small and positive. Empirical estimates support that view. But those estimates are uncertain and may be understated, because the effects of nontariff provisions are hard to measure and because issues with data keep researchers from identifying how PTAs affect the service sector. Most economic evidence suggests that the total number of workers directly affected by PTAs has been too small to significantly affect labor market conditions nationwide.

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One of my impressions of the Presidential debate was Trump’s disappointing, but unsurprising, opening salvo against free trade. Trade is a major issue for me in this election, because it is the only major area in which I strongly disagree with Trump’s apparent position. Going back and reading the transcript, I see that Trump didn’t […]

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Yet Another Theory of Trump

 

Here’s another theory of Trump. Well, it’s not really a theory, more just a set of disparate observations. I’ve broken it into chunks so you can tell me which parts you agree with, don’t agree with, and why:

  1. Trump means ratings. Trump means pageviews. Trump means advertiser sponsorship. The media (very much including Ricochet) deserves a large share of the blame for the Rise of Trump, in so far as it’s driven by relentless competition for profit. The media gave Trump a massive amount of free publicity, not realizing — because the media is part of a clueless elite — that Trump was not just an entertaining bonanza for ratings and a guaranteed-clickbait diversion, but a serious political candidate who spoke to and for a very significant number of their fellow Americans.
  2. The opening of the ownership of broadcast channels, cable, and satellite to private investors has changed our civic culture, and not for the better. It did not result in a competition to provide informative news coverage to a civic-minded public. It resulted in just what you’d expect: competition, period — and thus a race to the bottom for ratings. The result was the creation of a mass culture of empty commercialism and short attention spans unconnected to deeper spiritual, moral, or civic values. Shopping channels, infomercials, product placement, and reality TV gave rise to a population fascinated, even obsessed, with consumer brands, products, celebrities, and super-celebrities. The Rise of Trump or someone like Trump was, in this culture, inevitable.
  3. The Internet, likewise, failed to meet its potential as an instrument for communicating conservative political ideas, traditional and religious values, and democratic civic mores. Only media outlets with well-established brand names and an already-large audience, or huge financial resources, have been able to enter the Internet media market and draw the attention of the public in significant numbers. The profit model of major media and their portals (Facebook, Google) is based on selling goods. The audience is no longer captive — as it was in the time of newspapers and the broadcast cartel — and thus there’s ferocious competition to amuse it and keep it from switching to another channel or clicking on another site. The media has severely cut back on news reporting and analysis; what little reporting they do is often based on press releases from corporations and lobby groups, foreign and domestic. (The number of people who work in PR now vastly exceeds the number who work in investigative journalism.) There’s a massive focus on providing shows and websites that are immediately attractive to audiences and advertisers: sex, sports, violence, and comedy, rather than detailed and informative reports about complex trade negotiations, the budget, tax reform, or health care.
  4. Advertisers don’t, generally, like programs and websites with complexity and disturbing reporting that interferes with the “buying mood.” They seek programs, themes, and stories that lightly entertain and fit in with the spirit of the primary purpose of program: selling their products. (Thus people are far more likely to read about restaurants and vacation destinations abroad than elections or deeper geopolitical trends.)
  5. Western elites, political and economic, understood the fall of the Berlin Wall as a vindication of free-market capitalism. The victory was so complete and so overwhelming that regardless of evidence, this elite has blindly assumed free trade to be always and everywhere benevolent and even democratic (although exceptions are allowed when private firms need subsidies and bailouts). The mainstream media, which is part of this elite, internalized this ideology.
  6. The steady encroachment of marketing and advertising into every aspect of our lives displaced both religion and the political public sphere, replacing it with a shallow consumer culture unsuited to thoughtful, democratic participation. Increasingly, we live in a world of virtual communities built by advertisers and based on consumer demographics.
  7. Whereas once we lived in a world of physical communities, sharing a social life and common concerns with our fellow citizens — of all classes — increasingly we live in virtual communities that may superficially be political, but whose chief purpose is to buy and sell goods, not to create or service the public political sphere and a healthful democracy.
  8. This social sorting has been accompanied by geographic sorting: Increasingly, we literally have no idea how the other half lives. They don’t live in our neighborhood; they don’t watch the same television, and we don’t even talk to them on the Internet. In fact, we deliberately “unfriend” people who don’t share our view of the world. (This helps to account, for example, for the massive disjunct between the Ricochet primary and the real primary.)
  9. Non-stop entertainment (including sports) doesn’t just help to sell goods. It is, even if inadvertently, a vehicle for the transmission of the elite class’s political ideology, as well as the contemporary equivalent Roman circuses. It diverts the public from politics, reinforces the beliefs of the elite class, and creates political apathy — until the dam breaks.
  10. The public has nonetheless been aware that it has been working harder with stagnant or declining incomes; it has inadequate medical care at high cost, and education is the pathway to the elite class — but education is increasingly unaffordable, and the culture of our educational institutions increasingly bizarre. It knows that things are done in their name all over the world, often involving their sacrifice or that of their families, but not, seemingly, to their benefit. Few understand our foreign policy or its history, because the media provides almost no substantive information that would help them place any of it in context. Neither does our educational system. The media does not see providing this information as its key responsibility. Its key responsibility is to shareholders and advertisers.
  11. Case in point: NAFTA. Substantial American majorities opposed NAFTA. Only the elite favored it. But media editorials, news coverage, and “experts” overwhelmingly reflected elite preference. The “experts” repeatedly intoned that the benefits of NAFTA were obvious and understood by all qualified authorities, and that only demagogues and “special interests” were opposed to it. (The “special interests” who were the losers included lower middle-class white males.) The media dealt with the awkward fact that polls showed steady majority opposition to the agreement mainly by ignoring it or occasionally suggesting the public was uninformed and didn’t recognize its own interests.
  12. The lower-middle class, white men in particular, has been under siege in the United States for the past several decades, adversely affected by the deflationary policies of the 1980s, corporate downsizing, globalization, and the government’s support of, or indifference to, the damage being done to them. While this class experienced significantly diminished wages and benefits, more onerous working conditions, and greater insecurity, a “protected” elite in government, finance, tech, tenured academia, and the media failed even to notice this, no less consider its long-term political implications.
  13. Since the 1970s, the income of the top 1 percent of households has grown by 85 percent and the top 10 percent by 45 percent, but the bottom 60 percent lost ground. The income of the lowest 20 percent fell by 12.5 percent. Real hourly earnings among the working class fell 5 percent. This, along with the adverse trend of social indicators (morbidity and mortality, drug addiction, suicide) suggests that the welfare of the majority of the country declined in the age of globalization — a point that was unnoticed because of the abovementioned points: The elite class became ideologically ossified after the failure of the USSR, which they took as dispositive proof of the benevolence of free markets and their ability to lift all boats in their rising tides; moreover, the elite class mentally and geographically separated itself from the rest of the country, and thus literally did not see what was happening to it. The mainstream media, drawn from this class, barely noticed that only a minority had been the beneficiaries of global trade. It briefly noticed this issue during Pat Buchanan’s 1996 campaign, then forgot it again entirely.
  14. The media and professional politicians — the elite whom Peggy Noonan calls “protected” — thus failed to notice the discontent of the public. The elite domination of the media occurs so naturally that media news people, even when operating with complete integrity and goodwill, are able to convince themselves that they choose and interpret the news “objectively” and on the basis of professional news values. These constraints are so powerful, and built into the system in such a fundamental way, that they don’t see that they’re operating within them. Thus the media confused a public that had been lulled into apathy by cheap imported goods and cheap non-stop entertainment for a public that was, in the main, satisfied with politics as usual.
  15. As a result, the media both failed properly to report the sentiments of this public to policy makers and failed properly to report to this public with information it could use to guide its political decision-making. This public is now in full-scale revolt.

Do you agree with some, all, or none of the above? If so, why?

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I’m intrigued by the concept of setting up zones in poorer areas that have separate legal, economic, administrative, and political (LEAP) protections than their host country does. John Fund talks today about one such project taking place in Honduras: http://www.nationalreview.com/article/383899/honduras-says-yes-leap-zones-john-fund Preview Open

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