Of all of Trump’s promises, his talks on international trade were the strongest, and they were likely one of the biggest keys to him winning the election. Within 24 hours of winning the vote, Mexico and Canada both announced that they were open to renegotiating NAFTA.
As much as critics want to attack this, every country in the agreement has points that need changing. Here’s how a new NAFTA can help revitalize our entire continent.
Mexico
Trump called NAFTA the worst deal in history, and that wasn’t taking into account Mexico’s side of it all. While the deal has certainly hurt the U.S., Mexico has suffered 10-fold. Understanding just how bad the situation is starts with a few statistics.
First, Mexico has substantially more employed citizens than it did pre-NAFTA. While that seems like a positive, the next stat kills the good mood. Despite millions more jobs, real wages in Mexico are less than they were in 1993. That’s nearly unprecedented in world history, and NAFTA is almost entirely to blame.
The treaty stripped Mexico of its tariff rights, forcing the country to limit the bulk of its trade almost exclusively to the U.S. and Canada. This has led to steadily declining labor conditions, and that has formed the backbone of the problems facing Mexico today.
With no means of negotiating better trade, Mexican residents have been virtually forced to work in sweatshops. U.S. subsidized food killed farming for roughly 2 million workers, and without a solid agricultural foundation, the nation has had to rely on foreign-owned manufacturing to scrape by.
It’s no secret that the manufacturing jobs in Mexico are underpaid and foster conditions that would be criminal in the U.S. Faced with stagnant poverty and no means of escape, conditions were perfect for the cartels to take power.
In fact, their rise correlates perfectly with the declining conditions brought on by NAFTA. A renegotiation is a chance for Mexico to open trade outside the U.S. and push for the reasonable labor conditions we have enjoyed for a full century.
Canada
The Canadian situation is completely different from Mexico. Labor conditions and overall trade have been fairly stable, mostly because Canada has been able to temper the effects of NAFTA through the British Commonwealth. Since the Brexit vote, that situation changed rapidly.
While Brexit changes are far from final, the current stance is that Canada will severely cut its trade with the U.K. in favor of the EU. This puts Canada in a tight spot, because the Commonwealth gave them trade advantages that won’t be matched by the EU. In light of that, the country is forced to double down on NAFTA.
So far, the situation sounds grim, but there is a golden nugget of opportunity. NAFTA has promoted trade between Canada and the U.S., but trade between Mexico and Canada has not seen nearly the same level of growth. A new NAFTA forces Canada to diversify its international trade, and this is ultimately what the country needs in the wake of Brexit.
United States
There’s a lot of good that can come to the U.S. if President Trump renegotiates our current trade deals. Let’s start with a few facts. Conservative estimates show that NAFTA has cost the U.S. at least 800,000 jobs so far, and the numbers will continue to climb if changes aren’t made.
Critics will quickly point out that 6 million U.S. jobs depend on trade with Mexico. They’ll also say that the new Ford factory won’t affect U.S. jobs because the cars won’t’ be sold here.
Finally, they’ll note that if cheap jobs aren’t available in Mexico, then companies will just take manufacturing somewhere else. Those criticisms are based in truth, but they aren’t the whole story.
First, let’s talk about trade with Mexico. Regardless of the state NAFTA has left us in, the two countries will continue to be primary trade partners. The cost of shipping alone makes this a certainty.
Besides, better labor conditions in Mexico could empower the country to afford more trade with the U.S., rather than less. As for the Ford factory, if it doesn’t sell goods to the U.S., then it won’t be subject to U.S. tariffs, and this is the key point. U.S. companies will still be able to invest in Mexican labor, but tax changes will force them to export outside of North America.
This is a key component to expanding Mexican trade and its economy, and it can only happen after the current state of NAFTA is revoked. That said, domestic products will require more domestic production under higher tariffs, and this brings tens of thousands of manufacturing jobs back to the U.S.
Fixing free trade is never an easy job. A renegotiated NAFTA undoubtedly be good for Americans, our economy and life as we know it.
Cheers to America’s future! It looks bright under President Trump!
Regards,
Ethan Warrick
Editor
Wealth Authority
