Tags: nafta | negotiations | trade | trump

Cooler Heads Must Prevail in NAFTA Negotiations

Cooler Heads Must Prevail in NAFTA Negotiations
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Friday, 16 February 2018 09:30 AM Current | Bio | Archive

The Council on Foreign Relations points out that as a result of The North American Free Trade Agreement (NAFTA) regional trade increased sharply over the treaty’s first two decades, “from roughly $290 billion in 1993 to more than $1.1 trillion in 2016. Cross-border investment has also surged, with U.S. foreign direct investment (FDI) stock in Mexico increasing in that period from $15 billion to more than $100 billion.”

As an American exporter, I am concerned over the tone of the NAFTA negotiations. We can all agree that America deserves the best trade terms possible, but threatening to pull out of the agreement overplays our hand and sends some negative signals that jeopardize a valuable working relationship with Mexico and Canada.  

As a reminder, at one time, NAFTA enjoyed bipartisan backing—it was negotiated by Republican President George H.W. Bush and passed through Congress and implemented under Democratic President Bill Clinton. It encouraged a more than tripling of regional trade and cross-border investment between the three countries also grew significantly.

According to the Seattle Times, “NAFTA withdrawal is a danger to the American-Mexican security relationship. Economic integration and partnership created the conditions for our modern security work with Mexico. It was only after NAFTA that the U.S. and Mexico began a sustained collaboration on law-enforcement and border-management issues, which culminated in the Merida Initiative to fight organized crime and violence, and the 21st Century Border Management initiative to form a strategic relationship between the two economic partners.

The U.S. Chamber of Commerce proposes that the 24-year-old NAFTA pact helps secure America's borders and that it helps to create14 million American jobs.

In addition, Yahoo Finance notes that these 14 million jobs created through NAFTA pay better than those that have been lost. NAFTA also disproportionately benefits certain businesses, most notably the automobile and agriculture industries, which are represented by strong lobbyist in Washington.

The Congressional Research Service found that in the years since NAFTA was signed into law in 1993, U.S. trade with Canada and Mexico has more than tripled, growing more rapidly than trade with the rest of the world.

I really do not understand why there is a tendency by some in our government to want to beat up on Mexico, especially on trade. Mexico buys more American products than China and Japan combined. Mexico with a population of 120 million, purchases more American products than two countries with over 1.5 billion people. The problem is not that we have NAFTA, the problem is we do not have enough NAFTAs.

The reason why the U.S. sells so much to Mexico, is because we have complete access to that market, under the same conditions that Canada and Mexico have access to our market. As an American manufacturer and exporter, I am not asking anyone to restrict trade, I only want fair and equal access to foreign markets. I do not have access to China and Japan in the same way that they have access to our market. If we want to create good-paying jobs through better trade deals, that is what we should be focusing on.

According to The New York Times: “Under NAFTA, the three countries pay nothing on most goods that cross the border. After the United States exits the pact, the tariffs, or taxes, that Canada and Mexico put on its goods would rise. For some goods, tariffs could go as high as 150 percent. That would cause prices to spike and cut into company profits.”

Yahoo Finance, quoting analysts from Oxford Economics, warned in a note to clients: “Pulling out of NAFTA would likely also boost inflation, causing the Federal Reserve to quicken its pace of monetary policy tightening and perhaps choking off the market’s growth with a decline in U.S. Treasury yields and 5% drop in the S&P 500 (^GSPC). They also expect it to lead to a reduction of half a percentage point off U.S. gross domestic product growth in 2019.’’

Fox News reported that “Canada appears poised to fight fire with fire. The country filed a 32-page complaint to the World Trade Organization in December accusing the U.S. of nearly 200 examples of what it deemed unfair trade practices.”

Although the Trump administration is clearly playing hardball, Canada appears ready to continue to negotiate.  

Laura Dawson, the director of the Canada Institute at the Wilson Centre in Washington, told CBC News that it should come as no surprise that Trump is prepared to use the threat of withdrawal as a negotiating tactic.

"In my opinion, I think at a certain point Donald Trump will launch an intent to withdraw but the difference between the intent to withdraw and fully realizing that objective are very, very different," Dawson said in an interview with CBC's Power and Politics.

Yes, America must fight for its own interests on trade, but we can’t walk away from key trading partners. There appears to be some room for compromise which I hope the Trump administration will consider so that we give American exporters and importers an advantage without walking away from our key financial relationship with Canada and Mexico.

Neal Asbury is chief executive of The Legacy Companies.

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NealAsbury
We can all agree that America deserves the best trade terms possible, but threatening to pull out of the agreement overplays our hand and sends some negative signals that jeopardize a valuable working relationship with Mexico and Canada.  
nafta, negotiations, trade, trump
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2018-30-16
Friday, 16 February 2018 09:30 AM
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