Renegotiating NAFTA: Pros And Cons

Say what you will about Donald Trump — and you can say a lot — he’s keeping his campaign promises.  Considering some of the things he’s promised, that thought is more than a little frightening.

According to an article in CNN, today the White House officially notified Congress that the timer is on for the NAFTA renegotiation.  Like it or not, we’re going to see some changes.

During the debates, one of Trump’s more popular promises was his pledge to renegotiate NAFTA.  He’s not alone in calling it a poor deal; tons of folks, from Noam Chomsky to Bernie Sanders to Pat Robertson think it’s badly flawed.  Only a very few moderate Republicans and a fair number of Clinton Democrats still like it, and even they will admit that there were some unforeseen problems.

But is NAFTA really as bad as all that?  Or, as Pat Robertson famously put it, is it just that “All you have to do is come to Ohio and say ‘I think NAFTA is a bad deal,’ and everybody cheers.”  Is it really flawed, or are politicians just after the votes?  Well, let’s take a look at the details and find out.

(Spoiler Alert:  Whatever else is true, politicians are after the votes.  Surprise!)

Manufacturing

When NAFTA was first passed, the biggest American objection from both sides of the aisle was that our manufacturing jobs would rush to take advantage of cheap Mexican labor.  Which is of course exactly what happened; hundreds of thousands of manufacturing jobs were lost, and as many and more had their pay slashed.  The labor unions were displeased, and the Republicans took the White House as a direct result.

On the other hand, it’s equally true to say that Mexico gained a burgeoning manufacturing industry, and America got to enjoy inexpensive goods.  What’s more, as an unexpected bonus, American medical companies, many based in tax-free Puerto Rico, began to make enormous profits off the new markets.  And, let’s face it:  American manufacturing jobs were declining anyway due primarily to advances in automation, but also because of too-strong unions and cheap foreign competition; this way, the factories moved only a short distance rather than clear to China.

So a loss to the US, but one that was largely offset by other gains in medical manufacturing.  Mexico did OK there.

Agriculture

Before NAFTA, Mexico had a long history of labor-intensive farming.  Afterward, American agricultural conglomerates began to dominate the new market, and those farming jobs moved north across the border.  America gained cheap (albeit illegal) labor and Mexican farms vanished.  On the other hand, Mexico gained access to cheap processed food.

Overall, this is a net financial loss for the U.S. and a decrease in quality of life for Mexico, as locally grown foods went away.  Canada didn’t do all that well either.

Oil

When people think oil, they think OPEC, but there’s a ton of production in North America.  Mexican oil flooded over the border, bringing prices down and giving both economies a boost.  Then, Canadian oil shale began to be exploited en masse, which further crushed OPEC’s stranglehold and spread the wealth up north.  Due to the miracle of wealth generation by virtue of simply moving from here to there, Mexico, Canada, and the U.S.A. all got richer.

Downsides:  Venezuela’s economy crashed at exactly the time a hostile government took power.  Also, oil shale and oil sands exploitation isn’t exactly environmentally friendly.  Speaking of which, Mexican oil platforms are rather less safe than those subject to U.S. inspections.  But since Saudi Arabia started getting less of our money, I ain’t crying.  Environment aside, this is a big net gain for everyone.

Environment

The down side of cheap oil is that it suddenly becomes less profitable to try and replace it with alternative fuel sources.  Wind, solar, and tidal farms were all big research and growth areas pre-NAFTA; today, technology has advanced very little — and that little largely due to private enterprise.  This last is fine unless Elon Musk decides to become a supervillain — and he didn’t become Iron Man when he had the chance.  Just sayin’.

I’ve already touched on oil shale, oil sands, and oil rigs.  Add in pipelines, tankers, and oil trains and it starts looking pretty black (and oozy).  The flip side of this, though, is that coal mining suddenly became a lot less attractive to energy companies.  Black lung and stream pollution is on the decline — though so is the West Virginia coal lobby.

One of the things that goes along with manufacturing, wherever it happens to be, is pollution.  Air quality in northern Mexico has taken a dive, and several of the local rivers became positively filthy.  Better there than here, though, right?  Well, in case you live in California, one of those rivers flows toward you now; since NAFTA, the New River is now the most polluted in North America.

Generally speaking, though, this is pretty much a wash.  I mean, yeah, there are abuses, and industry is now spewing a ton of waste south of the border.  But it would be spewing a ton of waste anyway, and the abuses would still happen.  Because of the Maquiladora manufacturing program in Mexico, and due to environmental regulations in the treaty, it’s at least being contained and addressed — not well, but it’s a work in process.  Overall, there’s more pollution only because there’s more manufacturing.  Don’t like it?  Buy fewer cell phones or quit whining.

Trade

Did I mention that there’s more manufacturing?  Since NAFTA, the manufacturing capacity and output of North America as a whole has increased a great deal.  A lot of this is for domestic consumption; trade between the three signatories increased four times as a result of the treaty.  This reduced our collective reliance on overseas imports while providing leverage in trade negotiations with other nations — hence CAFTA.

Another immediate benefit is that both Canada and Mexico are richer overall, more so than if we’d simply handed them money.  Yes, the United States did take an initial hit, but now we have two nations that are delighted to be our favorite customers — and now they can afford to shop here.  Heck, due to the treaty, they can do a lot of that shopping without leaving home.  And that means — wait for it — the U.S. economy in general benefits from NAFTA.

So more trade’s a huge win for everyone involved.

Labor

As mentioned above, the Mexican agricultural sector basically vanished overnight.  Workers were forced to find factory employment, and the conditions were far harsher.  At the same time, American labor unions lost much of their leverage in negotiations.  Overall, quality of life declined for all concerned, even in Canada.

The other side effect here was a sudden massive increase in illegal aliens traveling over the border to find work.  They had no farms any more, and many couldn’t or wouldn’t find factory jobs.  In general, the increased porosity of the border has had massive negative effects, including smuggling, human trafficking, increased violence, decreased security, a general climate of flagrant disrespect for the law, and tons upon tons of cheap drugs.  Bear in mind:  This can’t all be blamed on NAFTA, but some of it can.

The only plus side here is in Mexico.  In part due to treaty obligations under NAFTA, in part due to market forces, working conditions in the Maquiladoras have improved.  But given the loss of local farming and the other problems, this is a huge net loss for everyone.

Mexican Drug War

I mentioned this above; it’s worth mentioning again.  In 2014, the hottest war zone in the world was not the Syrian civil war.  It wasn’t the brushfire nastiness along the Korean DMZ.  It wasn’t the Russian conquest of South Ossetia.  It wasn’t Kashmir or Iraq or Afghanistan.  It was just south of the U.S.-Mexico border, and it was all about drugs.

Well, I say “all about”.  It was more that the people really wanted money, and with the loss of local agriculture, an entire generation of young Mexicans had grown up in crushing poverty — right next door to the richest nation on Earth, and with neighbors in their own country that were amassing vast wealth from drug smuggling.  Life was cheap and money was there to be taken — so people did, and people died.

There’s more to it than that; there always is.  But NAFTA was one of the chief contributors to the recent violence.

Canada

You might notice there’s not much here about Canada.  That’s because, due to the earlier free trade agreement between the U.S. and Canada, it’s largely redundant.  Yes, Canada’s trade with Mexico doubled, but it’s still less than 2% of their GDP.  On the other hand, Canada should still be concerned; as a recent article in the Financial Post observed, if the renegotiation fails, it will cause chaos in our intertwined economies.

Other Thoughts

I honestly don’t know why Donald Trump opposes NAFTA.  His mind is a mystery to me.  But I do know that Bernie Sanders does too, and anything that Bernie and The Donald have in common deserves a deeper look.  Add in Pat Robertson and Noam Chomsky and you’ve got a broad range of people opposed to the deal.

Pat Robertson is probably the shiftiest and most cynical politician in American history.  Somehow, he survived Watergate and the fall of Nixon unscathed, and it wasn’t through personal virtue.  So I’m not even going to explore his thoughts on the subject; I’m just going to assume he wants votes for his causes and move on.

Bernie and Chomsky, however, have similar and easily-understood objections to the present status.  According to the official Bernie Sanders campaign website, the big problem he has with NAFTA is that it increases income inequality.  Chomsky is more verbose, but then he hasn’t been running for office; excerpts from his recent books describe a ton of problems both with this agreement (largely the collapse of Mexican agriculture) and with American foreign policy in general (we keep killing people wholesale).

The Bottom Line

First:  NAFTA is not about Donald Trump.  No matter who’s sitting in the Oval, NAFTA has some serious problems that need to be addressed.  And, given The Donald’s skillset and background, I can think of far worse people to take a crack at this.  Worst case, we have a trade war and a sudden opening in the top office.

(Yes, he’ll be gone if he fails.  No question about it.)

But even the most rabid Trump-haters should want him to succeed here, because there’s so very much that needs to be fixed.  From unequal environmental and labor regulation to illegal immigration and the Drug War, there’s so many problems that need addressing, it’s simply got to be done — and done well.  Put simply, we cannot afford not to.


(Image stolen shamelessly from Money Magazine.  The original article, about the 2016 debates, is at http://time.com/money/4537078/clinton-trump-debate-budget/ and is well worth a read.  Shamelessly, because I figure them wanting to advertise the article is why they made easily-stolen images in the first place, so: You’re welcome, Money!)

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